Interim Budget: Continue Concessional Corporate Tax for Manufacturing
In order to give a boost to manufacturing, in 2019, the Government announced 15% corporate tax rate for new manufacturing companies that are set up before 31st March, 2024. The Interim Budget should extend this deadline. Many in the corporate sector have requested the government to extend the deadline by a further 3 years. The Government should accept this request.
High unemployment rate biggest challenge in the Indian economy
The biggest challenge before the Indian economy right now is high unemployment rate. According to data from Centre for Monitoring of Indian Economy (CMIE), unemployment rate in India in December 2023 stood at 8.7%. India currently has the youngest population in the world. Median age of Indian population is around 28.4 years. This means that half the population of India is less than 28.4 years of age. Demand for jobs in India will therefore grow exponentially in the near term, as more young Indians enter the job market.
Extension of this scheme will give a boost to job creation
So any measure that gives a boost to job creation should be continued. The concessional corporate tax rate for new manufacturing firms is one such measure. It will encourage new investments in the manufacturing sector. It will create more jobs in the manufacturing sector. Jobs in the manufacturing sector are generally higher paying than jobs in other sectors.
More and more global companies are shifting their manufacturing base away from China. Under the current regime, the political, economic and social risks of China have become too high. India is poised to benefit from this. The concessional corporate tax rate may also encourage foreign manufacturing companies, that are not present in India, to invest in setting up new Indian subsidiaries.
Overall, the continuation of this scheme will benefit the Indian economy. If the interim budget announces the extension of this scheme, then it will give a boost to positive sentiments in Indian stock markets too.