Corporate tax cut to make India a hub of investment: Das

Describing the government’s move to slash the corporation tax rate as a bold measure, Reserve Bank of India (RBI) Governor Shaktikanta Das ( pictured) on Tuesday said it had made India a very attractive destination for foreign investment.

In the biggest reduction in 28 years, the government on Friday cut the corporation tax rate by almost 10 percentage points as it looked to pull the economy out of a six-year low growth and a 45-year high unemployment rate by reviving private investments with a ~1.45-trillion tax break.

Base corporation tax for existing companies has been reduced to 22 per cent from the current 30 per cent; and for new manufacturing firms, incorporated after October 1, 2019 and starting operations before March 31, 2023, it was slashed to 15 per cent from the current 25 per cent.

“It is a very bold measure, and it is a highly positive step. India’s corporation tax now becomes very competitive compared to other emerging market economies in ASEAN and other parts of Asia. So far as international investors are concerned, so far as FDI is concerned, I think India stands definitely in a very competitive position, and would be able to attract higher investments,” Das said.

With regard to domestic investors, he said, they now have more cash so they will be able to undertake more capital expenditure.

They can invest more and some of them can deleverage their liabilities, which will add strength to their balance sheets, he said after meeting Finance Minister Nirmala Sitharaman in New Delhi.

Talking about the meeting with the finance minister, the governor said it was a customary meeting ahead of monetary policy meeting.

“There is a long tradition that the governor meets the finance minister and discusses about the overall macroeconomic position. So, today’s meeting was basically that,” he said.

The three-day monetary policy committee meeting will begin on October 1 amid expectations of rate cut to be announced on October 4 in a bid to revive the sagging economy.

Last week, Das had said the government has limited fiscal space to support growth, but low inflation can help the monetary authority ease policy rates further and help boost the economy.