Which of the following statements is/are correct regarding fiscal policy and the World Bank's April 2025 South Asia Development Update? 1. The report urged South Asian economies to eliminate tax loopholes to improve domestic revenue mobilization. 2. A low tax-to-GDP ratio restricts a government's ability to implement countercyclical fiscal policy during economic downturns.

Question

Accepted Answer

Both 1 and 2 — Statement 1 is correct as the April 2025 World Bank report 'Taxing Times' specifically focused on revenue mobilization to build resilience. Statement 2 is correct because limited tax revenues constrain the government's ability to increase spending during a recession without severely worsening the fiscal deficit.

World Bank South Asia Development Update April 2025

Multinational Military Exercise Khaan Quest 2025