Howdy Modi

Parliamentary democracy has another problem. When opposition decides to oppose anything and everything, the Parliament becomes irrelevant. As it is happening this year, the affair of budget has shifted out side the Parliament. Finance Minister may have read budget speech in July in Parliament but it was far from over. Amid slowdown, which is partially cyclic, Finance Minister had been making hectic consultations with different section and announcing a slew of relief from tax, every week. This weekend however arrived with the big icings on the cake.

Reduction in Corporate Tax:

Yesterday morning Finance Minister announced that the Corporate Tax shall be slashed to 22% which effectively means about 25%. But this comes as a rider that the Corporate availing this tax rate would not claim any legacy rebate or concession.

Another announcement was for new manufacturing units commencing business after 1st October 2019 would have to pay income tax @15% only which effectively means 17%. This is how India fare in Corporate Tax among other countries:

Thus the combined tax liability of companies in higher tax bracket is likely to reduce by Rs 45,000 crore) compared to their global peers and leave them with more cash to invest and expand their businesses. This would lead to more job creation and better income growth, which will give a boost to the economy.

Trump to announce something:

Meanwhile PM Modi is in Houston to address a crowd of 50,000 people where President Trump will also join him. Rumour has it that President Trump will announce something big. What is it? Some kind of FTA?

17% tax on manufacturing units with some concessional tariff from USA will mean a big thumps up to industries to relocate to India, which badly needs it. It will also offset the move made by China which has devalued it’s currency and is relocating the industry to Europe and South Asia to avoid higher tariff.

Lets keep our fingers crossed.