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

1. A decrease in the tax to GDP ratio signifies that the growth in tax revenue is less than the growth in the Gross Domestic Product (GDP). This can be caused by several factors, including a slowing economic growth rate where the tax base (incomes, profits, consumption) grows slower than nominal GDP, or due to issues like reduced tax compliance, tax evasion, or significant tax cuts. Thus, slowing economic growth is a potential reason for a decreasing tax to GDP ratio. Hence, statement 1 is indicated. 2. The tax to GDP ratio measures the size of the government's tax revenue relative to the size of the economy (GDP). It does not directly measure the distribution of national income. Income distribution depends more on the progressivity of the tax system and the nature of government expenditure. A country can have a decreasing ratio but improving income distribution (e.g., by cutting regressive taxes) or vice versa. Therefore, a decrease in the ratio does not necessarily indicate less equitable distribution of national income. Hence, statement 2 is not necessarily indicated. 3. Based on the analysis, only statement 1 is indicated. The correct option is (A).