A cut in the corporate tax rate from 35 to 30 per cent and the elimination of the minimum alternate tax (MAT) in the coming Budget will have a positive impact on investments by corporates, according to a snap poll of chief executives carried out by the Confederation of Indian Industry (CII).
While 50 per cent of the respondents felt that the two measures would have a moderate impact, 33 per cent felt the impact would be significant. Seventeen per cent of the respondents felt there would be no impact at all.
A majority of the chief executives covered in the poll felt that a reduction in the corporate tax rate and the abolition of MAT should be permanent measures.
Apart from these two measures, the respondents also identified interest rate cuts as a factor that could encourage investments. Credit offtake and investments would pick up if the prime lending rate (PLR) was between 7 per cent and 8 per cent, according to 43 per cent of the respondents. While 40 per cent felt that the ideal PLR should be in the range of 8-9 per cent, 18 per cent felt it should be in the range of 9-10 per cent.
However, there was an equal split between those who were of the opinion the reduction in the Bank rate by the Reserve Bank of India had translated into a reduction in the lending rate by the banks and those who felt it had not.
Thirty per cent of the chief executives identified encouraging investments as the primary focus area of economic stimulus measures in the Union budget for 2002-03.
Eleven per cent felt it should be encouraging demand while 59 per cent felt it should be both.
Although only a few of the respondents advocated a solitary focus on reviving demand by stepping up government expenditure, most of them (96 per cent) felt it would have a positive impact on business.
The snap poll done by CII also looked at the expectations of the respondents for 2002. While 36 per cent felt there would be a revival in demand within six months, 23 per cent felt it would take up to an year. Nine per cent saw a revival in demand taking place within three months. However, 32 per cent felt that it would take more than a year for demand to revive.
Also, 36 per cent said that the pressure would be off their bottomline within a year
