IMF says corporate income tax cut will help revive investment in India
The International Monetary Fund supported India’s recent decision to reduce corporate income tax, saying it has a positive impact on investment.
It, however, said India should address continued fiscal consolidation and secure long-term stability of the fiscal conditions, the Economic Times reported.
“We believe India still has limited fiscal space so they have to be careful. We support their corporate income tax cut because it has a positive impact on investment,” Changyong Rhee, director of Asia and Pacific Department, IMF, told reporters at a news conference here.
Following a marked slowdown in the last two quarters in India, the economy is expected to grow at 6.1 percent this fiscal year, picking up to 7.0 percent in 2020, he said. “The monetary policy stimulus and the announced corporate income tax cut are expected to help revive investment,” said the top IMF official.
Anne-marie Gulde-wolf, deputy director of Asia and Pacific Department, IMF, said India should address the non-bank financial sector issues.
“While there have been improvements that have been put in motion, including efforts to recapitalize the state banks, the issue of non-bank financial institution remains partly unresolved and regulatory equity is one of the issues that needs to be achieved,” she said. The government is aware of it, she added.
“We also had a FSAP. So there are issues working at that and this is something that is why not yet fully achieved, but is entrained. While there are problems at this stage, increased attention to lending practices of non-bank financial institutions continue to be very important,” Gulde-wolf said.
Responding to a question, she said India overall has a fairly high level of debt and fiscal consolidation needs to be a priority.
“However, implementing fiscal consolidation in the context of a federal system is much more complicated. The level of fiscal structural issues and challenges are different in different states,” she said.