India’s fiscal engine is revving up, as its tax-to-GDP ratio reaches an impressive 19.6 percent—higher than emerging giants Hong Kong, Malaysia, and Indonesia, according to Bank of Baroda’s insightful report.
Encompassing revenues from federal and provincial levels, this ratio exemplifies rising tax dexterity and streamlined collections. The central slice at 11.7 percent of GDP is complemented by states’ strong performance, evidencing systemic compliance upgrades.
Yet, the journey continues: India lags behind Germany’s towering 38 percent and the US’s 25.6 percent. With demographics tilting favorably, this disparity offers a strategic window for policy innovation to capture more revenue.
Reform drives emphasize digitization, simplification, and rationalization. Landmark steps like the incoming 2025 Income Tax Act and corporate tax reforms are expected to boost transparency and simplify filings.
Launching April 1, 2026, the new act targets formalizing informal economies, widening the tax ambit. Longitudinal studies show tax inflows aligning closer with GDP growth trajectories.
Direct taxes mirror per capita income rises and compliance gains, while corporate levies ride high on profit booms, holding firm relative to past eras. These dynamics herald a promising era of fiscal resilience for India.