The reduction in corporate tax rate announced by Finance Minister Nirmala Sitharaman was a bold move and augurs well for the economy, Reserve Bank of India Governor Shaktikanta Das said.
“These are definitely bold and welcome measures. It will augur extremely well and will be highly positive for the economy,” Mr. Das said at an event organised by the India Today group.
One of the major drawbacks that the country had was high corporate tax rates and Friday’s cut would take the country closer to the rates prevailing in emerging economies such as Thailand, and the Philippines, he said.
Exchequer hit
The revenue foregone on reduction in corporate tax and other relief measures will be ₹1.45 lakh crore annually.
On Thursday, the RBI Governor had said there was little scope for fiscal expansion.
‘Not comparable’
On Friday, Mr. Das said that future rate cuts would depend on the incoming data but cautioned that India could not afford to have lower interest rates as in advanced economies.
“How much more can we go down (with the rate cuts)? We cannot go down to the levels of advanced economies. But how much we can go down will depend on the incoming data and other developments,” the RBI Governor said.
He said most of the advanced economies were having near-zero inflation and therefore, their rates were also low.
“But our inflation target is 4%, and therefore, that should be the guiding force.”
On Thursday, he, however had said, the central bank had room for rate cuts as inflation was projected to be less than 4% over the next 12 months.
The Reserve Bank has reduced the interest rate, the repo rate, by 110 bps during February and August to boost economic growth. The GDP growth for the first quarter of the current financial year dropped to a 25-quarter low of 5%.
(With inputs from PTI)
