TAX-CUTS-INDIA-INC-SAVINGS

Tax cuts: SBI pegs cos saving Rs 50K cr; prices falling 2-5%
    Mumbai, Sep 20 (PTI) The government unexpected move to
massively slash corporate taxes by over 10 percentage points
will result in savings of over Rs 50,000 crore to India Inc,
according to an analysis by economists at State Bank.
    The benefit coming in from the Rs 1.45 lakh crore tax
giveaways will also help companies to cut prices by up to 5
percent to boost consumer demand, which has been sagging and
is one of the prime reasons for the deepening slowdown.
    The economy has grown the slowest pace in six years at
5 percent for the June quarter, which has resulted in a rash
of measures from the government, including the massive tax cut
for corporates which varies from 10 t0 12 percentage points.
    "Corporate savings will jumps by Rs 50,000 crore,
product price can come down by 2-5 percent, boosting demand,"
they said in a note.
    With new effective rate of 25.17 percent, tax saving
for its sample of 3,446 listed companies could be at least Rs
44,000 crore, which is a substantial boon for the corporates
waiting for business revival in stressed environment, it said.
    Echoing other analysts who have flagged caution on
fiscal slippage, the SBI note said the fiscal deficit will
widen to 3.75 percent as against the targeted 3.3 percent.
Many others have pegged this at 4.1 percent.
    After calculating for the expected tax revenue
shortfall, decline in nominal GDP growth, expenditure
rationalisation initiatives and RBI surplus, the net impact on
the fiscal deficit will be Rs 82,000 crore or 0.4 percent of
GDP, it said.
    It also recommended the government minimise to the
extent possible the off-balance sheet borrowings so that
fiscal policy is more credible and acceptable to the market.
    The next stage of reforms we expect should now clearly
happen for factor markets, land and labour, and rural sector,
the report said. PTI AA
BEN BEN

(This story has not been edited by THE WEEK and is auto-generated from PTI)