India’s growth journey has been remarkable over the years, with the government playing an active role in fostering the country’s businesses and creating a conducive environment for them to thrive and expand. As continuation of these efforts, the Union Budget 2024-25 has recently announced a reduction of corporate tax for foreign companies, bringing it down from 40 per cent to 35 per cent now. The key strategic announcement, aimed at attracting more foreign businesses and investors to India, is also likely to provide a substantial boost to the businesses operating in the country, thereby driving further economic development.
Up till now, the high corporate tax rates prevalent in the country acted as a big deterrent for international firms considering to establish their base in India. Higher rates implied lower profit margins, which eventually made operations less viable for them. However, the recent slash in these rates is a pleasant news for these global firms. Reduced tax burden now makes India a more attractive destination for international businesses looking to expand. With its vast and diverse market, the country is now poised to draw in more international companies, leading to an increased capital influx and a boost in foreign direct investment (FDI). The rise in FDI is further expected to generate new job opportunities in various sectors of the Indian economy. Foreign firms often bring in their new projects and investments, execution of which requires a skilled workforce. This, in turn, would offer numerous employment prospects for the local population. Overall, these changes are predicted to have a significant positive impact on the Indian economy.
As a result of this change, the Indian business ecosystem is also likely to reap a multitude of benefits, paving the way for smooth progress in the long term. With more foreign companies crossing borders to set up base in the form of subsidiaries or joint ventures, Indian businesses would gain ample opportunities for collaboration with global entities. These partnerships will grant them access to new markets, technology and resources with ease, thus helping them broaden their horizons. Local businesses will also gain a unique chance to tap into the network and expertise of global players, which would further lead to significant enhancements in their knowledge and skills. As a result, these firms would be able to further improve their innovation capabilities, product offerings and customer experiences, ultimately leading to an expansion in their market reach. With one development leading to the other, Indian businesses would be able to establish themselves as key players in their respective industries.
The entry of more international businesses on the Indian soils would also facilitate the transfer of technology and best practices, which is likely to stimulate innovation and entrepreneurship in various sectors of the economy. As these businesses emerge stronger, they would be better equipped to compete with the foreign companies, which would indeed become a key necessity for survival. This heightened competitiveness would bolster Indian businesses on a global scale, thus opening the doors to new market opportunities for them around the world. The result would be a more dynamic, competitive and interconnected business environment, that would ultimately benefit the consumers and the economy as a whole. This vibrant business environment is also poised to give a significant boost to India’s exports, which would be helpful in improving the country’s trade balance.
Moving ahead, there is more to the kitty than this for the Indian businesses. With more foreign companies setting up operations in the country, there is likely to be an increased demand for goods and services offered by Indian firms. Certainly, international players would need to procure a variety of goods and services locally, ranging from raw materials and components to logistics and marketing services. As they source these products and services from Indian companies, it will lead to new opportunities and growth in various sectors of the economy, such as manufacturing, services, and technology, ultimately benefitting domestic companies.
This thriving business environment with lower corporate tax rates will eventually have a positive ripple effect on the overall economy. As Indian businesses flourish and expand, they would in turn create new job opportunities, generate higher revenues, and contribute to the country’s economic development. Needless to say, this strong move signals the government’s commitment to creating a business-friendly environment in the country. With initiatives such as these, the groundwork is being laid for a brighter future for domestic businesses. Looking ahead, it is safe to project that their growth would continue on an upward trajectory.
The article has been written by Ayush Gupta, Co-Founder and CEO of Swopstore
