Budget Byte: Healthy corporate profits may help improve govt spending

Corporate profits zoom over low base, led by banks 

In the quarter ending December, corporate profits have doubled for a sample of 379 companies analysed. Without banks, the growth in profit-after-tax still stands at a robust 34 per cent. Employee costs, which were growing faster when profits were falling, are growing slow now, but way ahead of the economic growth curve. These developments may bring in strong direct tax revenue in the second half of FY21. 

Direct tax collection on an improving trend, may continue 

Income and corporation tax collection are inching up gradually, shows data till November. Reports suggest that revenue losses were further contained in December. Rising corporate profits and relatively unaffected salaries may help continue this trend giving a positive impetus to government spending. However, this masks the poor growth in the top line of companies, which reflect the underlying demand problem, which may persist.


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