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The Centre’s ambitious targets to make India a $5-trillion economy by 2024 will need India Inc to fire on all cylinders but Finance Minister Nirmala Sitharaman offered a mixed bag to the corporate sector in her maiden Budget.
While corporate tax has been lowered from 30 per cent to 25 per cent, this has been extended only to companies with revenues of less than ₹400 crore. While the proposal will cover 99.3 per cent of all companies in the country, India Inc was hoping that the tax would be reduced for every one. Sharad Kumar Saraf, President, Federation of Indian Export Organisations (FIEO), said, “The Government may look into extending reduction in corporate tax to all companies irrespective of turnover so as to attract overseas investment waiting on the fringes both in the US and China though enjoying much lower corporate tax in their respective countries.”
The increase in income tax for those earning over ₹2 crore is another dampener. Milan Shah, Partner at PwC, said the effective tax rate is now about 42 per cent for those earning over ₹5 crore. This puts India in the league of countries with tax rate above 40 per cent, such as the US and the UK. “I do not think the Budget is growth-oriented. The stock market has also come down considerably,” said Adi Godrej, Chairman, Godrej Group. On the positive side, the Finance Minister promised to undertake labour reforms, kick-start the investment cycle in infrastructure and announced a number of measures to strengthen the markets and banking service industry. Sitharaman praised India Inc, saying “India Inc, our job creators, is the nation’s wealth creators. Together, we can prosper. ”
Potential for job creation
Top corporate honchos have supported the proposals. Ajay Piramal, Chairman, Piramal Group, said: “The focussed impetus for sustainable job creation via targeted investment in infrastructure projects and other productive sectors of the economy will have a cascading effect on secondary and tertiary employment.”
Ashok P Hinduja, Chairman, Hinduja Group of Companies (India), said, “Plans to enhance foreign direct investment in aviation, insurance and media, allowing social enterprises to list on stock exchanges are some of the interesting announcements. Now it’s to be seen how these and other policy announcements are rolled out on ground.”
Anil Agarwal, Executive Chairman, Vedanta Resources, said the Budget has set some mega targets like ₹100-lakh crore investment in infrastructure over the next five years that has the potential to completely change the face of the nation and help the economy reach the $5-trillion mark.
Anil Agarwal, Executive Chairman, Vedanta Resources - Bloomberg
Gautam Hari Singhania, Chairman and Managing Director, Raymond Ltd, said “We expect the proposed move to streamline multiple labour laws into a set of four codes will largely resolve the legacy issues and enterprise constraints with regard to the country’s skilled and unskilled labour force. The industry expects that standardisation of various labour-related definitions will effectively reduce disputes and bring uniformity in wages across States.”
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