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Top News of the Day: Corporate Tax Rate in India Cut, India Stock Market Soars

Professor of Financial Economics and Part-time Value Investor, Transfin.
Sep 20, 2019 12:33 PM 5 min read

Govt cuts corporate tax rate to boost the slowing Indian economy. Sensex gains 1,900 points, Nifty rises 5% in response. India GDP growth slashed. Airbnb plans to go public next year. 



Govt cuts corporate tax rate to boost the slowing Indian economy. 

Festive Cheers: In an attempt to spur the decelerating economy, the government today slashed the corporate tax rate.

  • The effective corporate tax has been cut to 25.17%, inclusive of all cess and surcharges for domestic companies 
  • For companies that do not avail any tax incentive, the rate has been cut to 22%
  • New manufacturing companies will have to pay an even lower corporate tax rate of 15%

Pros and Cons: The move is likely to result in loss of revenue for the government to the tune of INR1.45L cr annually. However, it is expected to encourage businesses to invest more.
Currently, business income is taxed at 30%, exclusive of cess and surcharge, other than the companies with sales of up to INR400cr, and new manufacturing companies which are taxed at 25%.

Sensex soars 1,900 points, Nifty gains 5%. 

Indian stock market soared on back of the news. BSE Sensex gained 1,921 points (5.32%) before closing at 38,014.62. Nifty50 ended at 11,275.45, up 571 points (5.33%).



OECD slashes India's economic growth forecast from 7.2% to 5.9%. 

Slashed: Paris-based policy forum, Organisation for Economic Co-operation and Development (OECD) has cut the GDP growth forecast for India by 1.3% points to 5.9% for 2019-20. It has also lowered its earlier forecast for the next year by 1.1 percentage points to 6.3%. 
The organization said that the US-Sino trade war has “sent global growth momentum tumbling toward lows last seen during the financial crisis.” It has predicted that the global economy will witness its weakest growth since the 2008-2009 financial crisis this year, slowing from 3.6% last year to 2.9%. 

Warns that the world is at risk of a new and lasting low-growth era due to the US-China trade war.

The OECD has warned that the world is at risk of a new and lasting low-growth era due to the US-China trade war if governments continued to dither over how to respond.
More on this here.



There is room for further lowering of interest rates as inflation remains below 4%, says RBI Governor Shaktikanta Das.

Make Some Room: With consumer price inflation projected below 4% over the next one year, there is room for further policy rate cut, especially in the face of a slowing Indian economy, noted RBI Governor Shaktikanta Das at the India Economic Forum. 
On the external sector, Mr Das said that the outlook is one of cautious optimism, albeit with some downside risks accentuated at this juncture.

External sector outlook cautiously optimistic.

He pointed out that the volatile international crude prices also continue to pose potential risks to the viability of the current account balance through trade and remittances channels. However, he was quick to add that India should continue to look for new export markets and niches to reap the benefits of changing dynamics of global value chains.
Read Shaktikanta Das’s speech delivered at the Bloomberg India Economic Forum 2019 in Mumbai here.



Airbnb plans to go public next year.

Home Listing: Airbnb has announced that it plans to go public sometime “during 2020”. The company was last valued at $31bn and has been planning on an IPO at least since March. While it hasn’t clarified on how it will list its shares, Reuters had reported that it might be considering a direct listing.
The home-sharing company would be joining a growing list of its start-up peers in pursuing an IPO. These include Uber, Lyft, Slack, Pinterest, CloudFlare and (now delayed) WeWork.

Google Pay is the most-preferred digital payments app in India.

Google on a High: As hundreds of millions of Indians embrace the internet and the digital economy, Google Pay is emerging as the prince of online payments. Last year, it was the most-downloaded financial technology app in the world. And in India, more UPI transactions were conducted on its platform than any other in August. As Google seeks to diversify its revenue model to beyond advertising, fintech looks like a promising bet and the world’s largest untapped digital market could be the engine of expansion the tech giant has been looking for.

Sell WhatsApp and Instagram, US Senator tells Mark Zuckerberg.

What the Zuck: Meanwhile, Facebook CEO Mark Zuckerberg spent his Thursday meeting critics of his company and the tech industry in Washington (including President Trump). He would have expected more than a few admonishments from US politicians, whose criticism of big tech cross party lines. But he might not have been prepared for Senator Josh Hawley’s challenge: Sell WhatsApp and Instagram to prove your commitment to data privacy.


Top News of the Day: Corporate Tax Rate in India Cut, India Stock Market Soars



Greta Thunberg to lead youngsters in massive international climate strike.

Youngsters of the World, Unite!: Greta Thunberg, the 16-year-old climate activist known for leading student protests and for her speeches at Davos and the UN, will lead an international coordinated strike of young people on Friday to protest government and business inaction on climate change. It is likely to be one of the largest environmental protests ever and could be followed by another one on September 27.

World leaders to assemble for Climate Action Summit on Monday.

Why Now?: Besides the rising dangers posed by the climate crisis, the immediacy of the strike was precipitated by the upcoming Climate Action Summit, which is scheduled for Monday, September 23. It will be held along the sidelines of the UN General Assembly and was called for by UN Secretary-General António Guterres. More details on the Summit and India’s participation in the same here.

How policy can effectively address the climate crisis.

Policy is King: How can concrete, realistic and effective measures be taken to combat and reverse climate change? By concrete, realistic and effective policies. This demands the involvement of governments, Central Banks, and corporations alike.



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