I have developed a drop down. In that I was trying to figure out how to reduce the <li> text gap or spacing.

What do you think, which css attribute is creating this gap or spacing. Here is the demo Click Here

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It's probably due to .wrapper-dropdown-2 .dropdown having a default (useragent) -webkit-padding-start value set to 40px (if using Chrome).

Just add

padding: 0;

to .wrapper-dropdown-2 .dropdown

BTW, I deleted the content of the .wrapper-dropdown-2 .dropdown li item and it made no difference. You seem to have a lot going on in your items - I'm sure you could do without at least half of it.