India has lowered its base corporate tax rate from 30% to 22% in order to boost investment and induce economic growth in the country.
The corporate tax rate cut was announced by India Finance Minister Nirmala Sitharaman. Following the announcement, the stock market rallied, including a 4.5% increase in the Sensex index.
The tax cut is part of India's recent efforts to boost spending and attract investments in the country. The move is part of the government's slate of reforms and it will only apply to companies that don't seek exemptions.
Meanwhile, firms that receive incentives or exemptions will enjoy tax rate rates lowered from 35% to 25%. Some of the new manufacturing companies will also have their corporate tax cut from 25% to 15%.
According to A Prasanna, head of research at ICICI in Mumbai, the move is expected to boost investment and employment. He said "This is a long overdue and hugely positive move by the finance minister. The new rates simplify the tax architecture and it will give a fillip to investments and jobs."
India's economic growth is currently at its lowest for the past six years, prompting the government to take action. Four rate cuts have already been undertaken by the country's central bank for this year, while the benchmark rate is at its lowest point in almost a decade.
Among the economic problems currently faced by India is the low level of per capita income. India’s net national product (NNP) per capita is at Rs 24,256 or Rs 2,021 per month, which shows that the masses have very low standards of living. Another challenge is the disparity in the distribution of income and wealth. Almost 60% of the total population account for one-third of the country's national income while only 5% of the population enjoy the same percentage of the national income.
Other issues affecting the economy include unemployment, underdeveloped infrastructure, and low level of technology.
