A decrease in tax to GDP ratio of a country indicates which of the following?<br/>1. Slowing economic growth rate<br/>2. Less equitable distribution of national income<br/><br/>Select the correct answer using the codes given below.

1. Slowing economic growth rate — Incorrect. Tax-to-GDP ratio is the share of taxes in national income. A fall in this ratio does not necessarily mean GDP growth has slowed; it may simply mean tax collections are growing more slowly than GDP due to lower tax rates, exemptions, weak compliance, or a larger informal sector.

2. Less equitable distribution of national income — Incorrect. A lower tax-to-GDP ratio can reduce the State’s redistributive capacity, but by itself it does not directly indicate that income distribution has become less equitable. Equity depends on the overall tax structure and public expenditure pattern, not this ratio alone.

Therefore, neither 1 nor 2 follows.