Rediff.com  » Business » India Inc bowled over by Sitharaman's 'new deal'

India Inc bowled over by Sitharaman's 'new deal'

September 20, 2019 14:58 IST

Industry, stock market and experts cheered slashing of corporate tax rate and other announcements by Finance Minister Nirmala Sitharaman, saying the big bang reforms will push economic growth and investments. 

IMAGE: Finance Minister Nirmala Sitharaman addresses a press conference in Goa on September 20, 2019, along with Minister of State for Finance Anurag Thakur (left) and Secretary for Revenue Ajay Bhushan Pandey. Photograph: ANI Photo

'Reducing corporate tax rate to 25 per cent is big bang reform. Allows Indian companies to compete with lower tax jurisdictions like the US. It signals that our government is committed to economic growth and supports legitimate tax abiding companies. A bold, progressive step forward,' Kotak Mahindra Bank CEO Uday Kotak said in a tweet. 

Biocon CMD Kiran Mazumdar Shaw also applauded Finance Minister Nirmala Sitharaman. 

 

'Corporate tax rate cut from 30 per cent to 25.2 per cent to spur growth- this is a great move which will firmly revive growth and investment. My hats off to FM @nsitharaman for this bold but most needed move,' she tweeted. 

Ashok Maheshwary & Associates LLP Partner Amit Maheshwari said, "Lately we have been loosing a lot of investments to other Asian countries who had been consistently reducing their corporate tax rate. This will help attract significant FDI and manufacturing to India. Abolition of DDT and going back to classical way of taxing dividends would be an icing on the cake." 

In a major fiscal booster, the government on Friday slashed effective corporate tax to 25.17 per cent inclusive of all cess and surcharges for domestic companies. 

Making the announcement, Sitharaman said the new tax rate will be applicable from the current fiscal which began on April 1. 

CII President Vikram Kirloskar said the cut in corporate tax from 30 per cent to 22 per cent without exemptions has been a long standing demand of industry and is an unprecedented and bold move by the government. 

"The finance minister's mega corporate tax stimulus is a major move to boost investors sentiments, encourage manufacturing and awaken animal spirits in the economy," he said in a statement. 

This move also indicates that the government is adopting a tax stimulus route rather than using higher government spending route to help the recovery process of the economy, Kirloskar added. 

"Coming just ahead of the festive season, there could not have been a better news as the entire country gets ready to celebrate," he said. 

Sharing similar views, Ficci said that these announcements will give a major boost to the "animal spirits" of corporate India and will reinvigorate the manufacturing sector that has been going through a difficult phase of late. 

With the kind of corporate tax rate cuts announced, India now becomes a competitive market in the region with our rates similar to those prevailing in the ASEAN countries, it added. 

FICCI was sure this trigger will lead to a virtuous cycle of investments, growth and higher employment, the industry body said. 

"The additional measures announced to stabilise the flow of funds to the capital markets by not applying the enhanced rate of surcharge on capital gains arising from sale of equity shares and units of equity funds is another major positive," it said. 

Property brokerage Investor Clinic's group firm Home and Soul's CEO Sakshi Katiyal said the announcement will boost the sentiments of the corporate sector. 

"Reduction of corporate tax will bring in overall positivity and growth at the grass root level. I believe that the industry will utilise this gift in the most judicious way, and help boost the economy in turn," she said. 

According to Frank D'Souza, partner and leader, corporate and international tax, PwC India, "The reduction in the corporate tax rate is a welcome move and makes India attractive for new investments. Also, the changes to CSR contributions and the relief on buy-back tax, will address past concerns and also help in channelling funds towards R&D initiatives." 

"This is yet another surgical strike on bears and negative sentiments in the economy which will create an environment of surplus in the hands of corporates for making further investments and ease their liquidity concerns. 

"The reduction to 22 per cent in corporate taxes will result in massive release of Rs 1,45,000 crore immediately in the economy which will boost sentiments and bring in real surplus to the corporates," Jimeet Modi, founder & CEO, SAMCO Securities & StockNote said.

According to Mustafa Nadeem, CEO, Epic Research, reducing the corporate tax rate is a big boost for the market. 

"This is huge for the market. There were few announcements that were keeping sentiments in check as the FM was trying to boost market sentiments and improve the state of the economy by boosting exports, banks consolidation, recapitalisation and so on but reducing the corporate tax rate is a big boost," Nadeem said. 

The domestic equity market cheered the move, with the benchmark BSE Sensex skyrocketing a record 1,955.46 points to 38,048.93 in intra-day trade. 

Leading bourse BSE also welcomed the move. 

"These decisions will be celebrated as historic and will go a long way in improving 'ease of doing business In India' even further," Ashishkumar Chauhan, MD & CEO, BSE said. 

"There are several other fiscal measures that have been announced which all point to the government's commitment to promoting the business activities and enhance job creation manifold. These announcements will further boost the investor confidence and start the investment cycle," he added. 

VK Vijayakumar, chief investment strategist, Geojit Financial Services said the measures announced by the finance minister can be described as a 'new deal' for the Indian economy. 

"The psychological stimulus from this 'new deal' will be higher than the fiscal stimulus. Animal spirits will respond positively. The message from Dalal street is a clear signal. Bold move indeed! Vijayakumar said. 

According to Suvodeep Rakshit, senior economist, Kotak Institutional Equities, the government's announcement is a prudent move as it will increase the retained earnings of companies and forms the investible surplus for future. 

Also, the step will move India to parity with its regional peers thereby removing one of the issues related to manufacturing and exports. The decision also maintains macro prudence by continuing to favour investment cycle rather than consumption cycle, Rakshit added. 

S Ranganathan, head of research, LKP Securities said: "The FM delivers the right recipe to cheer corporate India. The bulls are back and the sheer velocity of the rally signifies the extent of pessimism that has been prevailing in our markets." 

According to Rajiv Singh, CEO, Karvy Stock Broking, after a large number of minor measures, the government has announced a bold and major measure to revive animal spirits. 

"The high corporate tax rate meant that Indian companies were not competitive and this move helps address this and shall also boost FDI," he added.

© Copyright 2019 PTI. All rights reserved. Republication or redistribution of PTI content, including by framing or similar means, is expressly prohibited without the prior written consent.
SHARE THIS STORY