According to analysts at Australia and New Zealand Banking Group (ANZ), Friday’s announcement by the Indian government to cut the corporate tax rates for local companies is a fiscal push, which will effectively translate into a revenue loss of 0.7% of GDP, with risks to the upside.
Key Quotes:
“The direct impact of today’s move on propping up growth remains uncertain. It is important to bear in mind that India’s growth problems reflect a combination of weak demand and a constrained financial sector. We would accordingly, have favoured an expenditure-based stimulus that directly augments demand.”
“In aggregate, both monetary and fiscal levers are now being deployed to support growth. And yet, a solid growth response is still not assured. Against this backdrop as well as the possibility of lower inflation should corporates pass on the tax benefits to consumers, we see little impact of today’s action on monetary policy, and continue to expect the Reserve Bank of India (RBI) to cut the policy repo rate by 40bps on 4 October.”
Share
