India's Finance Minister Arun Jaitley
India's Finance Minister Arun Jaitley (C) leaves his office to present the 2015/16 federal budget in New Delhi February 28, 2015Reuters

India has slashed corporate tax rate by 5%, as the country looks to become more business friendly under Narendra Modi.

While presenting the federal budget for fiscal year 2015-16, Finance Minister Arun Jaitley announced that the country's corporate tax rate will be cut to 25% from 30% over four years.

The measure is expected to generate more employment in the country of about 1.3 billion people, according to the Minister.

He added that the country's economy will grow at 8-8.5% in the next financial years and expansion will be accelerated to double-digit rates in the subsequent years.

"Growth in 2015-16 is expected to be between 8-8.5 per cent. Aiming for a double digit rate seems feasible very soon," Jaitley said.

India's Central Statistical Organisation (CSO) earlier changed the way of measuring national income and revised the country's growth rate to 6.9% in the fiscal year ended in March 2014, compared to the earlier figure of 4.7%. For the year ended in March 2015, the country estimates a growth of 7.4% as per the new standards.

The Economic Survey had yesterday said the country could grow over 8% in fiscal year 2015-16, due to the cumulative impact of reforms, lower oil prices, likely monetary policy easing facilitated by lower inflation, and good weather forecasts.

The country's stock markets bounced back following the corporate tax proposal, but they fell into red as the budget did not have any other incentives for the corporate.

The BSE Sensex is trading down 1.1% at 28899.18 as at 07.54 am GMT, while the NSE Nifty has fallen about 0.9% at 8766.70.