Tax cuts will attract FDI in manufacturing: Icra

New Delhi: Recently announced corporation tax cuts will attract FDI in manufacturing and boost auto slowdown sooner, rating agency Icra said in a statement issued on Monday. The automotive industry accounts for about half of the country's manufacturing GDP.

The reduction of corporate tax rates will incentivise OEMs (original equipment manufacturers) and their vendors to increase localisation, which is a good sign for the industry, Icra said in a statement.

"Given the increasing US-China trade tensions, revision in corporate tax will attract FDI in Indian manufacturing sector, as the revised tax structure is now in line with other emerging markets," Icra said.
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"Given the increasing US-China trade tensions, revision in corporate tax will attract FDI in Indian manufacturing sector, as the revised tax structure is now in line with other emerging markets,"- Icra

Indian auto manufacturers have imported components worth $17.6 billion during 2019-20 (till now) and this is likely to increase further in 2020-21 given the transitionary phase towards stricter safety and emission norms.

In the current fiscal, the Indian automotive industry, especially the passenger vehicle segment, which was the growth engine, has witnessed one of the worst slides in the last two decades due to multiple factors like tighter financing environment for consumers and liquidity crunch faced by dealerships.

Besides, weak farm income and an overall slowdown in economic activity has impacted consumer sentiments and purchasing behaviour.

Clarity from the government that there is no further GST/cess revision will help consumers who were waiting for improved clarity prior to their car purchase decision, Icra Vice President and Sector Head Pavethra Ponniah said.