Cut in corporate tax will help to revive the economy over the next few quarters: Experts

The slew of measures announced by Union finance minister Nirmala Sitharaman on Friday to revive investment in the country including a cut in corporate tax will help to revive the economy over the next few quarters, feels experts.

Suman Chowdhury, president - ratings at Acuité Ratings & Research said "The tax rationalization announcement by the FM today is in line with our expectations and along with the ongoing accommodative monetary policy, should help to revive the economy over the next few quarters. The liberal cuts of almost 10% on corporate tax rates for both existing and also new manufacturing companies would surely have an impact on the fiscal deficit for the current year. Further, the removal of surcharge on capital gains will act to boost the sentiment of the equity markets and the FPIs."

Mr Motilal Oswal, CMD, Motilal Oswal Financial Services added "We do believe that we need fiscal stimulus to get out of this slowdown and monetary policy alone could not do that. Hence this move is very good for the country and markets. This is positive for all companies - tax rate goes down for companies from 300 -1000 basis points."


Mr Ajay Bodke, CEO PMS Prabhudas Lilladher said "The slew of measures announced today would act as a force multiplier for the flagging economic engine. By slashing corporate tax rate to 25% from 35 % (22% from 30% without exemptions) for existing domestic companies and an extremely attractive rate of 15% for new companies setting up manufacturing operations after 1st October 2019 and commencing operations before 2023, government has rolled out a red carpet that would ensure hundreds of billions of dollars of FDI & FII flows over the medium term.

Equity markets would rejoice as the multi-year cycle of earnings downgrade will finally come to an end. A significant valuation re-rating will follow as the market would start building in a virtuous cycle of upgrade in earnings trajectory over the medium-term due to both tax savings and boost in revenues due to perk-up in aggregate demand. The engine of domestic consumption will fire first followed by the investment engine on the back of corporates regaining their mojo. Incentives announced last week for export sector will also support the third engine of growth, that is exports."