India’s fiscal deficit gap is set to increase by at least 70 basis points to 4 percent of the gross domestic product (GDP) for 2019-20 after Finance Minister Nirmala Sitharaman announced a cut in corporate tax rates on September 20.

In a bid to revive growth and get the economy back on track, Sitharaman  said that domestic companies will have the option to pay income tax at 22 percent if they don’t avail any exemptions or incentives from 2019-20.

The minister also announced that the revenue foregone for the reduction in corporate tax rate would be Rs 1.45 lakh crore per annum – roughly about 19 percent of the total corporate tax target for the current year.

The move may result in an increase in India’s fiscal deficit from the budgeted 3.3 percent of GDP to 4 percent.

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