UPSC Prelims 2018 · CSAT

Question 76: Data Interpretation

The following graph indicates the composition of our tax revenue for a period of two decades : With reference to the above graph, which of the following is/are the most logical and rational inference/inferences that can be made?

1.During the given period, the revenue from Direct Taxes as percentage of gross tax revenue has increased while that of Indirect Taxes decreased.
2.The trend in the revenue from Excise Duty demonstrates that the growth of manufacturing sector has been negative during the given period.

Select the correct answer using the code given below.

a line graph of per cent of gross tax revenue (0 to 45) against years from 1990-91 to 2010-11 (BE), with five lines for Excise, Customs, Corporate tax, Personal income tax and Service tax

a1 only

b2 only

cBoth 1 and 2

dNeither 1 nor 2

AnswerUPSC’s answer is (a).

Statement 1: corporate and personal income tax, the direct taxes, rise from roughly 18% of gross tax revenue combined in 1990-91 to well over half by 2010-11, with corporate tax alone above 40%. Excise and customs fall sharply, and even with service tax rising, the indirect share falls. So statement 1 is true. Statement 2: a falling share of excise in total revenue does not show that manufacturing shrank, since excise collections and output can grow while the share falls. So statement 2 is false.

1. Corporate and income tax shares rise; excise and customs shares fall.
2. A falling share of excise does not mean manufacturing growth was negative.

How you could have got this

If you were sure statement 1 is correct, (b) and (d) go: each of them leaves 1 out.
What you needed to know: Corporate and income tax shares rise; excise and customs shares fall.
Then, if you were sure statement 2 is not correct, (c) goes: it includes 2.
What you needed to know: A falling share of excise does not mean manufacturing growth was negative.

Only (a) is left. This one needs every statement.

Which options go is worked out from UPSC’s key and the options, not by a model.

Why each option is right or wrong

(a) Correct: direct taxes gain share and indirect taxes lose it.
(b) A falling share does not show falling manufacturing output.
(c) Statement 2 is not a valid inference.
(d) Statement 1 is valid, so this is wrong.

Answer: UPSC’s key. Explanation: written by UPSC Grade, not by UPSC.

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Source: UPSC, Civil Services (Preliminary) Examination 2018, General Studies Paper II (CSAT), Series A. The paper on upsc.gov.in.