Consider the following statements: 1. Tax revenue as a percent of GDP of India has steadily increased in the last decade. 2. Fiscal deficit as a percent of GDP of India has steadily increased in the last decade. Which of the statements given above is/are correct?

Neither statement holds, so D is correct. The trap is assuming that a decade of fiscal growth means both indicators must move in one direction.

• Statement 1 is wrong. The Centre's gross tax-to-GDP ratio did not rise steadily. It peaked around 2007-08, fell after the global financial crisis, and stayed near 10 per cent for several years before recovering. The trend was volatile, not a steady climb.
• Statement 2 is wrong. The Centre's fiscal deficit jumped to about 6 per cent of GDP in 2008-09 and 2009-10 because of the fiscal stimulus. It then fell back to roughly 3.5 per cent by 2016-17 under the FRBM glide path. It went up sharply once and then came down, so it did not increase steadily.

The core concept is the difference between a one-off shock and a trend. For Mains, this links to fiscal consolidation under the FRBM framework and the debate on tax buoyancy versus the tax-GDP ratio. Note that the figures are for the Centre in the 2007-2017 period; later years, including post-GST and post-pandemic data, have changed the picture.