Impact of Corporate Tax Reform in India: Reduction of the Corporate Tax Rate in 2019

The Indian Government introduced a historic reduction in India’s basic corporate tax rate to 22% from 30%, and to 15% from 25% for new domestic manufacturing businesses in September 2019. This policy measure has been one of the most important interventions in India’s post-liberalization history. The present study critically examines the complex implications of India’s corporate tax rate reduction in terms of its macro-economic, sectoral, investment, and equity implications. The study uses data provided by India’s Ministry of Finance, Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI), Confederation of Indian Industry (CII), and peer-reviewed research articles published in 2021 and later to critically examine whether the tax rate reduction achieved its intended goals in reviving India’s slowing economy, boosting private corporate investment in India, increasing Foreign Direct Investment (FDI), making India more competitive in the global arena, and increasing employment opportunities in India. The study has also used Indian Knowledge System (IKS), especially principles of Arthashastra and principles of Dharmic Economic Governance to connect India’s civilizational heritage with its fiscal policy to understand whether India’s civilizational heritage has been reflected in India’s tax policy in any manner. The study has found that although India’s tax rate reduction has provided short-run benefits to India’s equity markets and has been perceived to be pro-business, its medium-run implications are ambiguous.