Corporate tax collections helped the Center to limit the fiscal deficit to just Rs 1.2 lakh crore in April-May 2021 as compared to Rs 3.5 lakh crore last year. The Economic Research Team of State Bank of India has written in its Ecowrap report released on July 19 that Corporate India has cut employee costs by an average of 3% in FY21. Chief Economic Adviser Soumya Kanti Ghosh wrote in the report, “The profits of Indian companies show a significant improvement due to the three benefits of lower interest cost, reduced expenditure and lower tax”.
Employment cost
“Employment cost has been cut by an average of 3% in FY21
The biggest cut is in the cost of those employees, who face the consumer.
Sectors whose employee costs have come down significantly include consumer durables, readymade garments and healthcare.
Curb fiscal deficit
SBI’s research report states that the corporate tax collection in the first two months of the current financial year (FY22) has grown so much that it has increased 2.56 times to Rs 43,454 crore from Rs 16,981 crore in the same period of FY20. The collection in FY19 was just Rs 1,126 crore.
The SBI report said that this jump has helped the central government to control the fiscal deficit within Rs 1.2 lakh crore.
The report also said that this jump in corporate tax could help the Center meet its tax revenue goal with ease.
Less debt burden
Commenting on the huge growth in profitability, the report noted that around 4,000 listed companies reported a 5% decline in the top line in FY21, with EBITDA and PAT growing at 24% and 105%, respectively, over FY20.
The report said- “Most importantly, 15 sectors have reduced loan funds by about Rs 2.09 lakh crore during the pandemic year FY21. Sectors like refineries, steel, fertilizers, textiles, mining, etc. have reduced their loan funds in FY21. from 6% to 64%”
job loss
The International Monetary Fund said that India is one of the countries most affected by the Kovid-19 epidemic. An IMF report in October 2020 said that the pandemic has pushed more than 40 million Indians into extreme poverty.
According to data released by the Center for Monitoring Indian Economy (CMIE), 2.27 crore people lost their jobs in April and May, the two worst months of the second wave of infections.
“If we talk about the start of the second wave of Kovid-19 in April 2021, the decline during this wave was 22.7 million. In April, 7.4 million people lost jobs and in May 15.3 million people. In the employment report, June has recovered only about a third of this cumulative fall.
