Tax Buoyancy: Too Noisy for Signals




The true trend in tax revenues has been obscured by pandemic-related effects, inflation, and discretionary policy changes in recent years. These hinder accurate assessment of the state of the economy, a correct picture of which can only be had by stripping out these effects. In particular, the increasing deployment of additional revenue measures in succession for several years has masked information on the economy’s health that is observed from the automatic movement of tax revenues along with the GDP. This paper focuses upon tax buoyancy, which includes discretionary policy changes, to examine how the historical relationship of tax revenues with income may have been disturbed by exceptional shocks. Using early data and other evidence, it illustrates probable impacts of non-linear and asymmetric normalisation, the extraordinary price growth and uneven distribution thereof, and fiscal policy responses in the pandemic. It further compiles additional revenue mobilization measures for a longer period from 2011-12 to highlight how newer and fresher fiscal efforts have been used to complement a stagnant or shrinking tax base and how these can be distortionary in aspects beyond the diffusion of important macroeconomic signals.


Tax revenue, Tax buoyancy, Discretionary Fiscal Policy, Revenue mobilisation


Download data is not yet available.

Author Bio

Renu Kohli, Centre for Social and Economic Progress

Renu Kohli is a Senior Fellow at the Centre for Social and Economic Progress (CSEP).


Choudhary, S. (2022, July 1). Change in GST rates may generate Rs 15K cr a year. Revenue secy Tarun Bajaj. Business Standard.

Dudine, P., & Jalles, J. T. (2017). How buoyant is the tax system? New evidence from a large heterogeneous panel. IMF Working Paper, 2017(4): 33.

OECD (2022). Revenue statistics 2022: The impact of COVID-19 on OECD tax revenues. Organisation for Economic Cooperation and Development.

PIB (2021, August 9). Rs 99,756 crore disputed tax amount settled under Vivad Se Vishwas scheme. Press Information Bureau, Ministry of Finance.

RBI (2023, March 2). Performance of private corporate business sector during Q3:2022-23. Reserve Bank of India.

RBI (2016, May 10). Union budget 2016–17: An assessment. Reserve Bank of India.

RBI. (2017). Annual Report 2016-17. Mumbai.

Singh, S. (2022, May 22). India mulls $13 billion extra borrowing to offset fuel-tax cut. Bloomberg.

Teli, R. (2023, February 13). Statement by Minister of State for Petroleum and Natural Gas in Parliament.