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India corporate tax cut may boost earnings, but unlikely to spur consumer demand

Companies must lower prices, launch new products to woo buyers

Hindustan Unilever, India's largest consumer goods maker, could see as much as 7% jump in earnings thanks to the tax cut.   © Reuters

MUMBAI (NewsRise) -- India's surprise move to cut corporate taxes to among the lowest in Asia may boost the profits of banks, automakers, and consumer goods companies, but the measure may not be enough to revive the sagging demand in Asia's third-largest economy.

On Friday, Prime Minister Narendra Modi's government cut the corporate tax to 22% from 30% as part of efforts to turbocharge the economy that has slipped into a slow lane in recent months, triggering factory closures and job cuts. The move sent the country's benchmark stock index surging, marking its biggest intraday gain in more than a decade. The index sustained the gains on Monday, with the S&P BSE Sensex gaining another 2.8% amid widespread upgrades in earnings estimates by brokerages.

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