Corporate tax Cut - Boost - Make in India

[resh]

The Government Aiming to boost Make in India,

15% tax on new manufacturing investments. Investment rate has been struggling due to low corporate savings and to the extent, this tax cut is likely to boost corporate savings and might help in reviving investment / capex.

Any new domestic company incorporated after October, 2019 and commencing before March 2023
Aimed at attracting companies and business opportunities shifting away from China
Indian manufacturing exports and FDI have stagnated and needed a booster dose
No benefit for central regulated utilities as tax is a pass through
Hyper-competitive sectors like vanilla contracting/airlines may end up passing this. They may benefit more from second order
effects of investment uptick

The measures announced are likely to turn the investor sentiment to positive as the tax cut is likely to help corporate profitability, increase business confidence and improve the capex outlook.

It could attract FDI inflows (where the focus is shifting from China) and kick start the private investment cycle. This, along with accommodative monetary policy, can have a positive impact on growth. This stimulus is a strong pitch for foreign investors to make in India. If coupled with more measures expected, may boost exports, lead to Job creation, and high GDP growth in coming years.

[Amol]

Services firms are expected to be major winners while manufacturing companies in the consumer goods, capital goods and steel sectors will also reap significant benefits as many of them have an effective tax rate of around 30 percent. The improving macroeconomic environment since 2014 has also helped improve India's attractiveness as an investment destination, as falling world oil prices have helped to reduce inflation pressures and also trimmed the current account deficit as a share of GDP as India's oil import bill has moderated.