NEW DELHI :
Nearly a month after slashing corporate tax rates to boost domestic investment, finance minister Nirmala Sitharaman on Saturday said she will soon prepare a plan to woo multinational companies seeking to shift production to countries outside of China because of trade tensions.
“I will go back and design in some way whereby I will identify those multinational corporations, American, European or British origin, who are moving out of China or who probably are even contemplating. I will make a blueprint with which I will approach them and put forward to them as to why India is a far more preferable destination," Sitharaman told reporters in Washington after completing her engagements at the IMF-World Bank annual meeting.
As part of the ongoing US-China trade war, President Donald Trump is putting pressure on American companies to move their manufacturing base out of China. So far, Vietnam has been a major beneficiary of the ongoing US-China trade tensions.
Sitharaman said since multinational companies that are contemplating getting their businesses out of China are “definitely considering India as an option, it might be important for the government to now see and meet up with a lot of industry leaders and invite them to India."
Last month, to give a fillip to domestic manufacturing and job creation, Sitharaman announced a cut in effective corporate tax without tax sops from 34.94% to 25.17% for existing companies and for new companies from 29.12% to 17.01% beginning 1 October.
The move, which made India’s corporate tax regime globally competitive, increases post-tax earnings of companies for reinvestment and distribution to shareholders. This is expected to help India become part of global supply chains of multinationals, especially those operating in the electronics manufacturing sector.
Speaking to reporters in Delhi last month, Sitharaman said the government will have an initial idea of how many foreign companies are interested in setting up manufacturing plants in India by early November. “If Apple and its entire ecosystem move to India, it will have a greater effect on other companies," she had said.
The finance minister said that opportunities in Vietnam are getting saturated as the country does not have enough manpower to address expansion programmes for investment.
“So, given the fact that we’ve given concessional taxation approach to corporate incomes, corporate tax having been brought down and the problems that I’ve just mentioned about Vietnam, there’s a higher chance that those companies which are moving out those investments which want to get out to China will certainly look at India," Sitharaman said.
The Indian economy is battling a severe demand slowdown and liquidity crunch that have resulted in economic growth slowing to 5% in the three months ended June and growth in private consumption expenditure slumping to an 18-quarter low of 3.1%. Industrial output has contracted 1.1% in August, its worst show in 81 months.
During the plenary session of International Monetary and Financial Committee (IMFC) on Saturday, Sitharaman said a calibrated and balanced approach to deploying a mix of fiscal, monetary and structural measures by countries can help achieve their growth potential.
“IMF should provide solutions that are specific to important growth geographies to help alleviate the current conundrum. IMF should evolve a policy framework that would assess the vulnerability of economies to capital flows and that developing stronger surveillance mechanism with sharper diagnostic tools can mitigate or even prevent the adverse effects on fragile economies," she added.
PTI contributed to this story