Tax cuts: Knee-jerk or part of a plan?

Like fans of filmstars or cricketers, investors have shown abiding faith in Mr Modi, who is still seen as a doer with the right intent and strong will

The Union finance minister on Friday, September 20, announced dramatic cuts in corporate taxes, which will benefit big taxpayers like Asian Paints, Nestle, Hindustan Unilever, Bajaj Finance, and HDFC Bank. They will also benefit new companies, which have the option of paying only 17.01 per cent tax. This announcement electrified the stock markets. The Sensex shot up by 5.3 per cent that day and 2.8 per cent the following Monday, making this one of the largest two-day gains in recent history. But the real impact has only been psychological.
 
Human beings love to extrapolate and so expectations are high.