India mulling to give ‘tax holiday’ to spur economic growth

• The Indian finance ministry is evaluating a proposal to give a 10-year full tax exemption to companies making a fresh investment of over $500 million.

In order to mitigate the economic impact of the coronavirus led economic shutdown, the Indian government is mulling the introduction of tax holiday to attract investments to boost up the economy.

As per Bloomberg, the Indian finance ministry is evaluating a proposal to give a 10-year full tax exemption to companies making a fresh investment of over $500 million. The report said that under the plan companies will need to start operations within three years from June 1, and will cover sectors such as medical devices, electronics, telecom equipment, and capital goods.

The report further pointed out that another variant of the program is in the planning as well, under which a four-year tax holiday will be given to companies that invest over $100 million in labor-intensive sectors, whereas, a lower corporate tax rate of 10pc is also under the proposal for the next six years.

The measures come after analyst Moody’s projected that the country expected to see 0% expansion in the current fiscal year, as the impact of the coronavirus outbreak will exacerbate the material slowdown in India's economic growth.

The rating agency said it expected India to see no growth in the financial year 2021 and bounce back to a 6.6% GDP growth in FY22, while the fiscal deficit is seen rising to 5.5% of GDP in FY21 versus the budgeted estimate of 3.5%.