Economic growth of India and the impact of direct and indirect tax : An ARDL approach

Abstract

This paper examines and portrays the impact of direct and indirect tax revenue on economic growth in India. Numerous studies were conducted earlier to study taxation from various perspectives, but very few have discussed the impact of taxation on economic growth. Various tax revenue reports from 1990 to 2021 were collected to conduct the present research. An ARDL inbound and outbound tests were applied to continue the investigation further. The study identifies tax variables that have a positive relationship with economic performance. Finally, an in-depth analysis was conducted between variables with the help of ARDL long-run trend analysis. The outcome reveals that direct and indirect tax growth rates positively impact GDP growth. It was suggested that government should focus on corporate tax policies, and more incentives for upcoming and existing entrepreneurs must be provided. The present study is limited only to tax and GDP revenue; it does not focus on economic or corporate policies. However, this research forms a base for further study in taxation, which will support designing policies for economic growth. It is known that the Indian government has introduced nation-one tax policy and implemented GST. Hence, further study can be conducted on the dynamics of GST and its impact on GDP or revenue growth rates.

Subject Classification:

• 92B10

Keywords:

• Direct tax
• Indirect Tax
• GDP
• ARDL
• Economy