SME Times News Bureau | 21 Sep, 2019
The Indian industry on Friday hailed
the government's Rs 1,45,000 crore stimulus, which includes slashing corporate
tax to 22 per cent for domestic companies, lower tax of 15 per cent for new
manufacturing firms and measures to boost the capital market.
"We welcome the Finance Minister's proposition of slashing corporate tax,
scrapping surcharge on buyback announced before July 5 and expanding the scope
of CSR spend," said Nagesh Basavanhalli, MD and CEO, Greaves Cotton Ltd.
The biggest booster dose of the Modi 2.0 government is expected to give a major
push to the sagging economy which clocked a 6-year low growth of 5 per cent in
the April-June quarter of FY20.
Anil Agarwal, Executive Chairman, Vedanta Resources, said that the government
move will definitely prove to be a huge impetus for the manufacturing and
infrastructure sector.
"We are confident this step, in coming days, will boost economic growth so
that Gross Domestic Products (GDP) can attain its true potential of 8-9 per
cent," he said.
The new set of measures is also aimed at lifting market sentiment which has seen
foreign portfolio investors (FPIs) pulling out their money from the capital
market since the Union budget announcement of raising surcharge on them.
The move to lower corporate tax, withdrawal of surcharge and other concessions
seem to have hit the right chord with investors as it sent stocks at both the
Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) soaring.
The lower corporate tax effected for 2019-20 through an ordinance is set to
induce private investment and boost consumption, the two key growth engines.
"India Inc. looks forward to a roller coaster festive season tax bonanza
to ride the tide of positive sentiments. This positive sentiment will go long
way in resurrecting dying economy, but we also hope that super tax on the individuals
and HUF would also be further rationalised at 35 per cent from currently
obnoxious rate of 42 per cent to uplift the end-users spirit," said
Niranjan Hiranandani, Senior Vice President at industry body Assocham.
Business and industry see the fresh measures helping them in beating the
slowdown which has gripped the entire country for quite some time. With global
headwinds continuing and the world economy slowing, the stimulus measures could
not have been more timely.
As the corporate tax rate has now been brought at par with many emerging
economies and countries in South East Asia, industry captains hope it will make
the Indian economy globally competitive.
For companies going for fresh investments, there is a big incentive now as they
will have to pay a lower tax of 15 per cent.
It might be mentioned that lower corporate tax of 22 per cent will apply to
those companies which choose not to take any other exemption or incentives. The
companies making incorporate after October 1, 2019, would be eligible for lower
15 per cent tax.
"Finance Minister Nirmala Sitharaman's Rs 1.45 lakh crore stimulus to
reboot India is a bold move to unleash the animal spirit! This can certainly
turn the tide for the economy & markets! Also, it's a move towards simpler
low tax regime with no or minimal incentives exemptions (which are misused more
than used)," said Nirmal Jain, Chairman, IIFL Group.
While hailing the government move some of the experts highlighted the fiscal
risks involved with it.
"The tax reliefs announced are likely to put upward pressure on the fiscal
deficit needing a revision in the government's borrowing target for the year.
This would likely lead to upward pressure on bond yields but this could get
mitigated if RBI chips in with an aggressive policy rate reduction," said
Dheeraj Singh, Head of Investments & Fund Manager, Fixed Income, Taurus
Asset Management Co. Ltd.
As the new measures would cost the government Rs 1.45 lakh crore in revenue,
many experts see this to have an impact on government spending.
"Whilst it might take some time for the investments to materialise, it is
a step in the right direction. One should also examine how this move impacts
government spending," said Akila Agrawal, Partner & Head, M&A,
Cyril Amarchand Mangaldas.