Just a few weeks after corporate taxes were lowered, media reports this week suggested that further tax cuts are under consideration. While this would almost certainly push the central government’s budget deficit target out of reach, there is a case for fiscal loosening given the worse-than-expected performance of the economy this year. Meanwhile, as speculation about tax cuts helped push the Sensex to an all-time high, we also revised up our forecasts for Indian equities to reflect a shift in our expectations for global risk appetite.
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