Tax cuts for Corporates but no relief from Income Tax - Is it the right decision.

There is no doubting the fact that Global Growth has slowed. 

All over the world - since the economic crisis of 2008 there has been a growing debate that whether increase in Global Trade has been actually beneficial - especially for the common man.  

Jobs in the developed world have been lost to developing countries (e.g. China) which have grown exponentially by exporting goods to the developed world.  

And the developed world especially US is now driving the increase of jobs back in their economy by imposing duties on goods which are imported in the USA.  The hypothesis being that as manufacturing returns jobs will get created and that will result in political benefits. Hence the trade war.

As tariffs on Chinese goods increase, industries want to shift their manufacturing plants to other countries (where there are no or less tariffs imposed by US). 

One of the important factors for this is corporate tax  i.e. the tax which such industries will pay to the govt. on their profits. 

India till now had high corporate rate tax and by lowering its corporate tax - it is now become competitive - for companies to relocate to India.   

But is this the only factor - not really there are other reforms which are required e.g. labour reforms (simply put freedom to companies to hire and fire workers).  This reform is unlikely.  The answer lies on hiring contractual workers. 

The tax reform - was the biggest factor - which has now been done.  

Contrary to this a reduction in income tax would have boosted the income of Indian consumers resulting in higher consumption.  That would have resulted in growth - perhaps immediately. 

However the policy seems to be moving in favour of getting the Global manufacturing industry to India. 

Ultimately - if that were to happen - the impact will be much more and favourable for the govt..

It will take time and that's fine as the next general elections are 4 years away. 

Let's keep a watch as to which states of India are able to get Global Manufacturing Industry - the ones who are able to will have it easy - relatively - for a reelection perhaps.

Manufacturing creates jobs and large scale manufacturing will create lots and lots of jobs.

(Disclaimers : For information purposes only)