India cuts corporate taxes to counter slowing growth

Published September 20, 2019
The economy grew at an annual rate of 5pc in the April-June quarter, its slowest annual pace in six years. — Reuters/File
The economy grew at an annual rate of 5pc in the April-June quarter, its slowest annual pace in six years. — Reuters/File

The Indian government on Friday announced a slew of concessions aimed at boosting the economy that will reduce most corporate taxes for local companies to about 25 per cent from 30pc.

Finance Minister Nirmala Sitharaman said the lower tax rates will retroactively apply from April 1, the beginning of India's fiscal year.

Share prices surged, with the Sensex in Mumbai jumping more than 5pc to its highest level since July.

India's economy, the world's 6th largest, was booming until recently but it has slowed in recent months, with growth in manufacturing dropping to 0.6pc in the last quarter from 12pc a year earlier.

Overall, the economy grew at an annual rate of 5pc in the April-June quarter, its slowest annual pace in six years. Many economists believe Prime Minister Narendra Modi's signature economic policies are at least partly to blame.

A surprise demonetisation in 2016 and a new goods and services tax have taken a dire toll on many businesses. Instead of improving government finances as intended, the GST and demonetisation undermined India's financial stability, economists say.

Sitharaman said that new manufacturing companies incorporated after October 1, will be taxed initially at an effective rate of 17pc.

Analysts welcomed the move.

“The fiscal steps by the Indian government are likely to re-energize investor interest in the subcontinent,” Jeffrey Halley of Oanda said in a commentary.

“India still has a non-performing loan swamp to drain, but this is most definitely a step in the right direction,” he said.

Follow Dawn Business on Twitter, LinkedIn, Instagram and Facebook for insights on business, finance and tech from Pakistan and across the world.

Opinion

Editorial

Defining extremism
Updated 18 Mar, 2024

Defining extremism

Redefining extremism may well be the first step to clamping down on advocacy for Palestine.
Climate in focus
18 Mar, 2024

Climate in focus

IN a welcome order by the Supreme Court, the new government has been tasked with providing a report on actions taken...
Growing rabies concern
18 Mar, 2024

Growing rabies concern

DOG-BITE is an old problem in Pakistan. Amid a surfeit of public health challenges, rabies now seems poised to ...
Provincial share
Updated 17 Mar, 2024

Provincial share

PPP has aptly advised Centre to worry about improving its tax collection rather than eying provinces’ share of tax revenues.
X-communication
17 Mar, 2024

X-communication

IT has now been a month since Pakistani authorities decided that the country must be cut off from one of the...
Stateless humanity
17 Mar, 2024

Stateless humanity

THE endless hostility between India and Pakistan has reduced prisoners to mere statistics. Although the two ...