A judicious lowering of input costs can increase productivity.
Shyam Ponappa | October 3, 2019
While stock markets were euphoric, experts have been divided in their opinion, because demand has been subdued and these are supply-side incentives. Another reason is that companies paying high taxes gain the most, while the majority don’t gain directly in profits. Profits will rise for the highest taxpayers by 11 per cent, while large FMCG companies such as HUL, ITC, and Nestle will increase profits by 9 per cent (Moneycontrol). Profits for IT and pharmaceutical companies are estimated to increase by 5 to 6 per cent, and existing automobile manufacturers are unlikely to benefit directly during this slowdown, although new ones will pay 17 per cent tax, as in Singapore. However, a number of auto component manufacturers who paid taxes at 29-35 per cent will get increased profits of 4 to 10 per cent, and Icra expects localisation to increase. Crisil’s study of nearly 1,000 companies in 80 sectors estimated that profits would increase by nearly Rs 37,000 crore, while the State Bank of India, based on about 3,500 companies (and this newspaper based on 490 companies), estimated increased profits of about Rs 45,000 crore, and India Ratings of Rs 60,000 crore. These profits could result in price cuts, spurring demand.
1: For a good example applied to Aadhaar/PDS, see: Subhashish Bhadra and Varad Pande