Journals Information
Advances in Economics and Business Vol. 13(1), pp. 1 - 12
DOI: 10.13189/aeb.2025.130101
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Unveiling the Nexus: Exploring the Empirical Linkage between Gross Tax Revenue and Economic Growth in India
Nitish Kumar Arya *
University Department of Economics, Bhupendra Narayan Mandal University, India
ABSTRACT
This paper provides new empirical evidence for the existing literature on tax buoyancy in the Indian tax system. The objectives of this paper are to identify the relation between gross tax revenue (GTR) and gross domestic product (GDP) at constant and current market prices in India by fitting a log-regression model with an interaction variable to the stationary time series data based on augmented Dicky Fuller and Phillips-Parron tests for the period 1950鈥�51 to 2021鈥�22. The result shows that the GTR to GDP ratio is increasing at a constant rate with the increase in GDP during the pre-tax reform period (1950-51 to 1991-92) in India. And gross tax buoyancy estimate is more than unity during post tax reform (1991-92 to 2021-22) and the entire study span (pre-reform period and post-reform period) evincing the fact that the ratio of GTR to GDP is increasing with the increase in gross domestic product at a constant market price during post tax reform period and overall period (1950-51 to 2021-22). One of the major findings that have emerged from our study is that there is a unidirectional causality running from aggregated income to aggregated tax revenue. The tax system performs poorly in mobilising revenue, and the tax revenue of India is low by international standards. Tax revenue exhibits high buoyancy with income, particularly in the secondary sector, indicating significant potential for revenue generation through rising incomes. These findings highlight the necessity for coordinated government efforts to implement appropriate policy measures for effective tax design and administration.
KEYWORDS
Tax Buoyancy, Gross Domestic Product, Tax Policy, India
Cite This Paper in IEEE or APA Citation Styles
(a). IEEE Format:
[1] Nitish Kumar Arya , "Unveiling the Nexus: Exploring the Empirical Linkage between Gross Tax Revenue and Economic Growth in India," Advances in Economics and Business, Vol. 13, No. 1, pp. 1 - 12, 2025. DOI: 10.13189/aeb.2025.130101.
(b). APA Format:
Nitish Kumar Arya (2025). Unveiling the Nexus: Exploring the Empirical Linkage between Gross Tax Revenue and Economic Growth in India. Advances in Economics and Business, 13(1), 1 - 12. DOI: 10.13189/aeb.2025.130101.