Revenue Roadblock

The government's push for ambitious infrastructure spending is constrained by the country's historically low tax base.

By DIPAK MONDAL

The National Democratic Alliance (NDA) government says the core of its economic strategy is investment-led, and not consumption-led, growth. However, its ambitious plan to invest heavily in infrastructure is being hit by a resource crunch, at the heart of which is the country’s extremely low tax base — the proportion of people out of the total population that pays taxes (see A Narrow Base). A lot of income and business activities in India go unreported. Due to this, the government loses a significant tax revenue, both direct and indirect. This is the reason for the country’ low tax-to-GDP ratio of 9-10 per cent over the past five years. Brazil’s tax-to-GDP ratio is 14 per cent. The figures are 15 per cent for Russia and 25 per cent for South Africa (as…

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Business Today (Digital) - 1 Issue, February 28, 2016

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