Prime Minister Narendra Modi termed the corporation tax cut as “historic” and “a win-win for 1.3 billion Indians”, and said that it would spur private investments from across the globe that will create more jobs.
The PM, who will land in the US on Saturday, and address a roundtable with top executives of 16 of the world’s biggest energy companies in Houston, tweeted: “The step to cut corporation tax is historic. It will give a great stimulus to Make In India, attract private investment from across the globe, improve competitiveness of our private sector, create more jobs and result in a win-win for 1.3 billion Indians.”
Apart from the CEO roundtable in Houston, the PM will also take part in another such event with top executives of 45 of the world’s biggest companies in New York on September 25. He is likely to invite these corporates to invest in India and highlight the tax cuts. “The announcements in the last few weeks clearly demonstrate that our government is leaving no stone unturned to make India a better place to do business, improve opportunities for all sections of society and increase prosperity to make India a $5-trillion economy,” the PM said.
Congress leader Rahul Gandhi alleged the cut has been announced with the objective of making PM’s Houston “jamboree” a success. Left leaders like Sitaram Yechury said the government is trying to push supply side measures to bring the economy back on track, but the move will fail to address the real problem of lack of demand.
Opposition parties accused the Modi government of not only having transferred the money it received from the Reserve Bank of India as tax cuts to corporates, but also in eroding the sanctity of the Budget making exercise by announcing decisions within two months of the Budget, and four months before the next Budget. The Congress demanded similar tax breaks for the middle class and the salaried.
However, there were also those in the Congress who pointed out, although off the record, that P Chidambaram and Pranab Mukherjee had promised to bring down corporate tax rates when they were finance ministers. In 2014, Arun Jaitley, in his first Budget, had also promised to lower it over a span of five years. The Modi government had failed to act on it in subsequent years after Rahul Gandhi accused it of being a ‘suit boot sarkar’, or a government of and for moneybags, in 2015.
Rahul Gandhi slammed the move. “Amazing what PM is ready to do for a stock market bump during his ‘Howdy Indian Economy jamboree’. At Rs 1.4 trillion, the Houston event is the world's most expensive event, ever! But, no event can hide the reality of the economic mess “Howdy Modi” has driven India into,” Gandhi tweeted.
Yechury said, "the money snatched from RBI, Rs 1.76 trillion, has finally been transferred to corporates by the Modi government, giving them Rs 1.45 trillion upfront. This is a scandal. This will not help demand. Friendly cronies get a bonanza, but no extra money in hands of people. Rural wages have fallen under this government." “When we needed more money in the hands of the people to stimulate demand, the government has handed it to corporates instead. This is crony capitalism at its worst,” Yechury said, adding the announcement was timed for proposed spectacle of “Howdy Modi” in the US.
Commerce and Industry minister Piyush Goyal congratulated the PM and Finance Minister Nirmala Sitharaman for the “path breaking announcement”. He said the move will boost investments and create employment opportunities. His ministerial colleagues Dharmendra Pradhan, Smriti Irani and Anurag Thakur expressed similar sentiments in their respective tweets.
Congress leader Jairam Ramesh said: “A headline-it is afflicted, panic-stricken Modi Sarkar has cut corporate tax rates less than three months after a Budget and four months before the next one. This is welcome but it is doubtful whether investment will revive. This does nothing to dispel fear that pervades in India Inc. Timing of FM announcement dictated by ‘Howdy Modi’ event. PM can now say, ‘I have come to Texas promising lower Taxes’.”
Congress spokesperson Randeep Surjewala asked whether the corporate tax rate cut would lead to revenue loss of Rs 1.45 lakh crore, and how will the government compensate for this loss? He asked whether this would mean more taxes on petrol, diesel, electricity or if it will be recovered by “bleeding” profit making PSUs like LIC? He asked how will the government tide over the deficit, “by fudging budget figures?” He asked why the middle classes and the salaried left out of the tax relief completely.
Opposition leaders said New Delhi hoped to benefit from the US-China trade war, and try persuade American companies to shift their business to India instead of going to South East Asia from China, but such a prospect was difficult given the state of infrastructure in India and much more turnaround time at Indian ports.