By Praveen Paramasivam
(Reuters) – India’s plans to cut personal income tax rates will put more disposable income in the hands of the people and eventually boost consumption in the world’s fifth-largest economy, executives from automobile and consumer firms said on Saturday.
This comes after the government said that people earning up to 1.28 million rupees ($14,800) per year will not have to pay any taxes, raising its threshold from 700,000 rupees. It also cut tax rates for people earning above the new threshold.
Consumption in the Indian economy has been under stress in the last few quarters as shoppers tightened their purse strings amid stubborn inflation and modest wage growth.
“Tax reforms benefiting the middle class will increase disposable income, further fuelling demand across essential and aspirational categories,” Aasif Malbari, CFO of Godrej Consumer Products, said.
The government’s announcement sent the shares of consumer goods, autos and realty firms up by 1.7%-3.6% on Saturday.
“The tax cut is going to be a helpful factor in accelerating demand for various kinds of consumer products,” RC Bhargava, chairman of Maruti Suzuki India, told TV channel ET Now.
(Reporting by Praveen Paramasivam; Editing by Dhanya Skariachan and Sonia Cheema)
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