India gives companies $20.5 bln tax break
(UPSOT) (English) INDIAN FINANCE MINISTER, NIRMALA SITHARAMAN, SAYING:
"With effect from fiscal year 2019-20..."
India's finance minister announces her government's latest move to boost the economy:
A tax break for companies shaving five per cent off a 30 per cent corporate tax rate ...
Though - if companies forego other tax incentives - they could pay as little as 22 per cent.
From next month - brand new firms may pay even less still: just 17 per cent.
Stock markets liked it - gaining over five per cent on the news.
Analyst Sunil Shah.
(SOUNDBITE) (English) STOCK MARKET EXPERT, SUNIL SHAH, SAYING:
"There is a huge reduction in corporate tax and that's a big positive because then the macro numbers of the corporates improve. So, price-to-earning, price-to-go, things like that will improve."
And it fits with prime minister Narendra Modi's pledge to boost lagging growth and encourage investment.
India grew at an annual rate of 5 per cent between April and June - a red-hot rate for many economies is India's coolest in 25 quarters.
There is one problem though:
(SOUNDBITE) (English) INDIAN FINANCE MINISTER, NIRMALA SITHARAMAN, SAYING:
"The total revenue foregone .... is estimated 145,000 crores per year."
In other words - the new move will leave a 20.5 billion dollar hole in government revenues.
A number that spiked Indian bond yields near three-month highs - on fears the government may have to borrow more to meet its expenditure needs.
