Top banker Uday Kotak has always been upbeat about the Narendra Modi government and after the dual win in Gujarat and Himachal Pradesh he has said that stable growth for the economy would continue. But he has a suggestion for Arun Jaitley: Bring down corporate tax rate to increase government’s income.
Uday Kotak, vice chairman and managing director of Kotak Mahindra Bank, has backed corporate India’s demand for lower corporate tax, saying that it would lead to increase in government’s income. “I am a believer that as you reduce rates, income goes up for the government, and therefore, reduction in corporate tax is a little boost to animal spirits,” Uday Kotak said in an interview with CNBC-TV18.
“I do hope that the finance minister brings down the total corporate tax, which is the direct tax rate plus all the surcharges,” he added. Earlier this month, Corporate India suggested lowering the corporate tax to 18%-25%, from up to 30% at present in the pre-Budget meeting with Finance Minister Arun Jaitley. The 2015 Union Budget — the first full budget of the present government — proposed cutting basic rate of corporate tax to 25% from current 30% over the next four years, accompanied by fewer exemptions.
Meanwhile, the government has also formed a task force for redrafting the Income Tax Law, 1961, according to the present needs of country’s economy and international best practices. The task force will give its report in next few months.
Uday Kotak, on the apprehension that the upcoming budget may turn populist after a narrow margin in BJP’s victory in Gujarat, said that he believed that the current policy of the government of fiscal disciple and building sustainable growth would continue. “I think, on the whole area of rural and agri sector, we are going through a period of transition, from an informal economy to formal economy and some of these measures are having issues and friction but fundamentally when you go for transformation friction is a part of the game,” he said.
As India enters into the poll-bound 2018, it is likely that ruling party’s reforms spree takes a pause for populist measures, Assocham pointed. “In the run-up to the 2019 Lok Sabha elections, states including Rajasthan, Madhya Pradesh, Chhattisgarh and Karnataka are due for polls in 2018. Inevitably, it would be the popular voters’ sentiment that would be factored by the Centre and the state governments in their policies,” Assocham said.
The Finance Ministry is presently holding pre-Budget sessions with different stakeholders. Arun Jaitley is likely to present the 2018-19 Budget on February 1.