FM Nirmala Sitharaman slashed corporate tax rates across the board —lowering it to 15% for companies incorporated after 1 October — sending the markets soaring by 1650 points — the highest one-day gain
Friday will probably be the defining moment for Finance minister Nirmala Sitharaman, who is just about 120 days on her first stint in North Block. A day after Reserve Bank of India Governor Shaktikanta Das signaled that there was room for another round of rate cuts given the benign inflation level, Sitharaman, in a press conference which lasted 40 minutes, announced a booster dose for India Inc. Sitharaman slashed corporate tax rates across the board—lowering it to 15% for companies incorporated after 1 October--sending the stock markets soaring by 1650 points—the highest one-day gain.
Friday will probably be the defining moment for Finance minister Nirmala Sitharaman, who is just about 120 days on her first stint in North Block. A day after Reserve Bank of India Governor Shaktikanta Das signaled that there was room for another round of rate cuts given the benign inflation level, Sitharaman, in a press conference which lasted 40 minutes, announced a booster dose for India Inc. Sitharaman slashed corporate tax rates across the board—lowering it to 15% for companies incorporated after 1 October--sending the stock markets soaring by 1650 points—the highest one day gain.
Here are three takeaways:
Firstly, with this the Bharatiya Janata Party (BJP)-led National Democratic Alliance (NDA) has reclaimed the narrative, which over the last six months had acquired a sense of “gloom and doom". Sitharaman’s budget, which had some missteps, had only added to the perception that Prime Minister Narendra Modi-led NDA had lost its mojo with respect to the Indian economy. In Goa on Friday, Sitharaman unveiled her version of shock and awe to silence the growing ranks of her critics for now.
Second, the FM has shown uncanny boldness with her decision in a fiscally different year. Instead of being cautious about decelerating revenue collections, she announced a giveaway package which will cost the exchequer ₹1.45 lakh crore. It is a sentiment that will not be lost on the markets, which will now expect more in her second budget due on 1 February next year.
Third, Sitharaman has announced a sunset for various direct tax exemptions, which besides distorting investment flows, had also rendered Indian industry less competitive, especially against global players. To be eligible for the extremely low corporate tax rates companies will have to abandon incentives. The fiscal crutches coming off may hurt some companies, but in the long run it will work for India Inc as they improve their global competitiveness.
In the final analysis it is clear that Sitharaman has done her bit for the economy. Now it is over to India Inc to take it from here.
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