The Investor wealth on Friday zoomed a whopping Rs 6.82 lakh cr in single day as equity markets rallied, with the Sensex skyrocketing 2,284 points in intra-day trade, following a slew of economy-boosting measures announced by FM Nirmala Sitharaman. The 30-share key BSE index zoomed 1,921.15 points or 5.32 per cent to close at 38,014.62. During the day, it advanced 2,284.55 points to 38,378.02, its biggest intra-day spike in over a decade. The bull market led the market cap of the BSE-listed firms to soar Rs 6,82,938.6 cr to Rs 1,45,37,378.01 cr in single day. “Today’s measures, without exaggeration, have revived the sagging economic situation and has reinfused the “Josh” among the corporate and capital market fraternity. Apart from the benchmark indices correcting, it was more to do with the sentiment which was hitting new lows day after day,” Devang Mehta, head (equity advisory) of Centrum Wealth Management, said.
In the fourth phase of post-budget economic stimulus measures, FM cut base corporate tax for existing companies to 22 per cent from the current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019, and starting operations before March 31, 2023, to 15 per cent from the current 25 per cent.
Sitharaman also said no tax will be charged on share buyback by listed companies that announced such a move prior to July 5. Also, super-rich tax by way of enhanced surcharge on income, announced in the Budget, will not apply to capital gains arising on equity sale or equity-oriented funds liable to securities transaction tax to stabilise flow of funds into capital markets. To spur innovation and R&D, the Centre also allowed India Inc to use the mandatory CSR spend towards research. The rules governing the CSR spending norms had been amended, Sitharaman said “Now this CSR 2% fund can be spent on incubators funded by Central or State governments or any agency of a Central or State PSU.”
Prathap C Reddy, Chairman, Apollo Hospitals
We heartily welcome the measures. Corporate India has for long been advocating standardised rates of corporate taxation, as a tool to drive creation of investible surplus and enhanced dividend payouts to drive purchasing power. At this time of global economic slowdown, we see this as a decisive move by the Centre to enhance competitiveness of Indian industry in the domestic and international arena. We also welcome the initiative to give even lower levels of tax rates to new manufacturing firms. India has the potential to become the manufacturing hub for the world, and drive job creation. In healthcare, this will give a boost for the manufacture of domestic consumables and devices.
Gopichand Hinduja, Co-Chairman, Hinduja Group
The current reduction in corporate tax announced by Finance Minister Nirmala Sitharaman is an excellent step that is needed for the Indian economy’s revival and (boosting) manufacturing sector. I only wish more such steps which the government is already contemplating could be taken together in one go, like tapping the NRI investment, so as to create deeper impact, instill more confidence
R Ganapathi, President, SICCI
Deepavali, at times, arrives early. The announcement by FM is positive, giving a shot in the arm for the economy. The changes announced will affect the corporate profitability in India. These tax rates, while being bold and welcome measures, take us closer to the tax rates, which prevail in this part of the world. This tax cut boosts corporate savings, paving the way for greater investment and capital expenditure plans. The move will boost consumption, credit and investment in the economy. It will be beneficial over the long run as the tax rate is competitive compared with other countries. This is a strong message to the world that India is open for business.
KE Ranganathan, MD, Roca Bathroom Products
A superb move by the Centre to stimulate corporate savings which will get channelised into investments, better pay and promotions. This will directly boost demand. Corp taxes have been on a high side for some time now, and this move appears to be the right one. Hope this decision is long-term and sustained. I am also confident the Centre will further spur demand via GST reductions. The other move on ‘Loan Mela’ across India is the right approach to make money available to small traders and consumers. These good measures to push demand should win back sentiment and propel the economy back to 7% growth next year
Shekar Viswanathan, VC and Whole-time Director, Toyota Kirloskar Motor
This is a welcome structural change and comes as a great respite to corporates. This positive move from the Centre will lead to further investments in the country as well as create more business opportunities. The ‘Make in India’ initiative will thus get a further impetus. As far as automotive sector is concerned, we believe that on a mid to long-term basis, the government should consider the merits of moving towards a carbon (fuel efficiency)-based GST taxation policy which will not only lead to huge fossil fuel savings but will also help in lowering emissions
TS Kalyanaraman, CMD, Kalyan Jewellers
It is extremely positive to see the government move pragmatically and provide the much-needed liquidity boost to the economy. Lower tax rate will increase transparency in the Gems and Jewellery industry, which will ultimately lead to a shift from unorganised to organised sector. We welcome this dynamic decision implemented by the government
CP Gurnani, Chief Executive, Tech Mahindra
The corporate tax relief measures are a concrete step to stabilise the economy, boost investment, spur growth and create jobs in key sectors
Jatin Dalal, CFO, Wipro
The government has taken a giant leap in tax reforms. It’s a huge boost to corporates and will enhance India’s position as a competitive destination for fresh foreign investments. The corporate tax relief measures are a concrete step to stabilise the economy, boost investment, spur growth and create jobs in key sectors
Aditi Nayar, VP, Principal Economist
We expect today’s announcement to provide a big boost to business sentiment in the immediate term, with a modest knock on impact on consumption demand, particularly for big ticket items. However, the impact on fresh investment activity may be visible with a lag
Pronab Sen, former Chief Government Statistician
It is certain concern for fiscal deficit of 3.3 per cent which will be under pressure. The tax cuts pushes up for more borrowings due to gap between revenues and expenditure. But if they want to keep the fiscal deficit under control, they have to cut capital expenditure as from revenue side they can cut very little like cutting PM Kisan Card. But in a slowing economy, if you cut capital expenditure, it does raise an alarm. It is actually more worrying now with such kind of tax cuts as it is not going to have an expansionary impact immediately but if you cut expenditure it may have an immediate contractionary impact. That will further sink the economy. Inflation may go down further
B Yerram Raju, veteran banker, head, Telangana Industrial Health Clinic
Had this been done as first move, the other stimulus would have no need. Knee-jerk reactions, loan melas and merger of banks, and proposed GST reductions are not warranted. Economic growth sans fiscal discipline would land us in more precarious position. We have the biggest human resource potential and should be harnessed for growth