India has slashed its corporate tax rates in order to encourage companies to make investments and help grow the nation’s struggling economy.
Indian finance minister Nirmala Sitharaman noted that the base corporate tax rate would be reduced from 30% to 22%.
Shortly after the announcement, the nation’s stock market experienced a rally, with the Sensex index surging 4.5%.
India’s tax cuts are part of the latest measures to promote spending and attract foreign investments.
As part of several new reforms introduced on Friday, India will be lowering its corporate tax rate for firms that are not looking for exemptions. Companies that receive exemptions or other types of incentives will see their tax rate reduced from 35% to 25%.
Local manufacturing startups will see their corporate tax rate cut from 25% to 15%.
Head of research at Mumbai-based ICICI Bank Prasanna Balachander believes the reduced rates would help attract more investments and create new employment opportunities.
“This is a long overdue and hugely positive move by the finance minister. The new rates simplify the tax architecture and it will give a fillip to investments and jobs.”
India’s government has taken several measures to boost the nation’s economic growth, which is currently at a six-year low.
The Reserve Bank of India has reduced corporate tax rates four times this year. The country’s benchmark rate is at its lowest in nearly a decade.
India has been relying on domestic consumption to promote growth, however spending has slowed down considerably.