India has cut its corporate tax rates in an effort to spur investment and boost growth in the country’s faltering economy.
Finance Minister Nirmala Sitharaman said the base corporate tax rate would be lowered to 22% from 30%.
The surprise move triggered a stock market rally, with the Sensex index jumping 4.5%.
The tax cuts are the latest measures to boost spending and shore up investment in India.
Under the slate of reforms announced on Friday, India will lower its corporate tax rate to 22% from 30% for companies that don’t seek exemptions.
Firms that do receive incentives or exemptions will see their tax rate cut to 25% from 35%.
In addition, some new manufacturing firms will see their corporate tax rate lowered to 15% from 25%.
A Prasanna, head of research at ICICI in Mumbai, said the move would boost investment and employment.
“This is a long overdue and hugely positive move by the finance minister. The new rates simplify the tax architecture and it will give a fillip to investments and jobs,” he told Reuters.
India’s economic growth is sitting at a six-year low and the government has taken a series of steps to boost the economy.
So far this year, India’s central bank has cut rates four times and the benchmark rate currently sits at a near-decade low.
The country has relied on domestic consumption to fuel growth but spending has slowed sharply.