US lesson for Modi govt – personal tax cuts & higher govt spending boost investment

The Print
Subhadip Sircar
September 23, 2019

Paper published by IMF suggests rise in US business investment since tax cuts in 2017 isn’t necessarily due to the cut in the corporate tax rate.

India’s decision to cut corporate taxes may benefit from lessons learned in the United States.

A recent study suggests that the rise in U.S. business investment since the passage of the Tax Cuts and Jobs Act in late 2017 isn’t necessarily due to the cut in the corporate tax rate from 35% to 21%, which aimed to lower the cost of capital. The paper published by the International Monetary Fund puts forth a simpler reason: investment has been rising because domestic demand was boosted by lower personal taxes and higher government spending.

India hasn’t decided on cuts to personal taxes, Finance Minister Nirmala Sitharaman said at a briefing on Sunday. She is betting that local firms will pass on the corporate tax cuts to customers in the form of lower prices to stimulate demand.

While certain types of firms, such as consumer goods makers, might do so, the bulk of listed companies are already sitting on manufacturing slack and would prefer to reduce debt rather than build factories or hire more workers, Neelkanth Mishra, India strategist at Credit Suisse Group AG, told Bloomberg Quint. 

Indian firms won’t necessarily use the tax cuts to return cash to shareholders — unlike their U.S. peers — but fresh investments could take time, according to A. Vaidheesh, managing director at Glaxo Smith Kline Plc’s Indian unit.

“The current slowdown cycle is different from the 2012-13 slowdown as the consumption demand is also significantly constrained,” said Madhavi Arora, an economist at Edelweiss Securities Ltd. “Therefore a broader tax cut covering all economic agents would have probably yielded better economic returns.”

Comments

Post a Comment

Popular posts from this blog

ED tracks Swiss Bank A/Cs of Agusta scamster

The Poineer February 10,2019 Rakesh K Singh The Enforcement Directorate (ED) has tracked a dozen Swiss bank accounts in the name of Rajiv Saxena, who is key accused in the Rs 3,600 crore AgustaWestland VVIP chopper scam. The ED has also found out accounts held by  his family members and associates where the kickbacks in the now scrapped deal were allegedly parked. Two bank accounts are in the name of Rajiv Saxena’s  associates Pankaj Jain and Sumita Jain who are also the authorised signatories. The  third is in the name of another associate Ajit Singh Bubber, but Rajiv and his family members are authorised signatories. The remaining nine accounts are largely owned and operated by Rajiv, his family members and associates. Rajiv Saxena was deported by the UAE authorities on January 30 and the ED formally arrested him the next day and a court later granted his remand to the agency. He is currently undergoing custodial interrogation by the ED. The agency had in 2017 arrested his
Read more

J&K Cricket Board Scam: Chargesheet Filed Against Farooq Abdullah, 3 Others By CBI

OUTLOOK July 16, 2018 The agency has levelled charges of criminal conspiracy and criminal breach of trust under the Ranbir Penal Code against Abdullah and three others. The CBI on Monday filed a chargesheet against former Jammu and Kashmir chief minister Farooq Abdullah and three others in a special court in Srinagar in connection with alleged irregularities and misappropriation of funds in the Jammu and Kashmir Cricket Association. After the fall of the Peoples Democratic Party (PDP) and the BJP government, this is the biggest development that has taken place in the state. The National Conference has not reacted to the chargesheet so far. The agency has levelled charges of criminal conspiracy and criminal breach of trust under the Ranbir Penal Code against Abdullah, the then president of JKCA, Md Saleem Khan - the then general secretary, Ahsan Ahmad Mirza - the then treasuer and Bashir Ahmad Misgar, an executive in the J&K Bank. The BCCI gave Rs 112 crore t
Read more

As financial insecurity rises in urban India, so does investment in insurance

Image
Scroll.in March 13, 2020 Urban Indians are becoming less confident about their financial security. Up to 58% of them fret over financial independence post retirement, which is a 4% increase from last year. An equal share of urban Indians worry about meeting their daily medical expenses and sustaining their current lifestyle once they stop working. The findings are part of a survey published by Delhi-based Max Life Insurance in association with London-based consultancy Kantar. The firms surveyed 7,014 respondents in 25 cities, including six metros, nine tier-1 cities, and 10 tier-2 cities, between December 2019 and January 2020. Source: Max Life Insurance via Quartz The trends Source: Max Life Insurance via Quartz Source: Max Life Insurance via Quartz Source: Max Life Insurance via Quartz A significant share of urban Indians also say their families will have no financial support in the event of the breadwinner’s death. In such a scenario, around 57% believe the family sav
Read more