Shaktikanta Das’ thumbs up on corp tax rate cut: Govt move to attract FDI; companies to invest more

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Updated: September 24, 2019 1:21:19 PM

RBI Governor Shaktikanta Das said on Tuesday that India is expected to attract higher foreign direct investment (FDI) going forward with the corporate tax rate becoming competitive.

Shaktikanta Das, corporate tax cuts, RBI Governor, Nirmala Sitharaman, corporate tax rate, Nifty, domestic companiesOn September 20, Finance Minister Nirmala Sitharaman announced to cut the basic corporate tax rate for domestic companies to 22 per cent from 30 per cent.

RBI Governor Shaktikanta Das said on Tuesday that India is expected to attract higher foreign direct investment (FDI) going forward with the corporate tax rate becoming competitive. In addition, the companies now have more cash to invest and can even develarage as well, TV news channels reported him as saying after the meeting with Finance Minister Nirmala Sitharaman for pre-monetary policy consultation. On September 20, Finance Minister Nirmala Sitharaman announced to cut the basic corporate tax rate for domestic companies to 22 per cent from 30 per cent. The effective tax rate for domestic companies was reduced to 25.17 per cent from 34.94 per cent inclusive of surcharge and cess.

There is an overall positive environment on economy due to recent decisions taken by the government, he said adding the corporate tax rate cut is a bold and positive step making India competitive as compared to other emerging markets. In earlier weeks too, Nirmala Sitharaman had announced a slew of economic reforms to boost the slowing economy. The RBI will announce its fourth bi-monthly monetary policy statement in October 4, 2019. The analysts expect a 25 basis points cut in the repo rate. However, the hardening of bond yields owing to the fiscal pressure will also play in the minds of the members of  the monetary policy committee. Since January this year, the RBI under Governor Das has already cut the repo rate by 110 basis points.

Also read: Income tax relief: Govt shelves big cuts due to huge revenue impact

“With this fiscal boost focused on investment revival and not consumption (hence not inflationary), we reckon that the RBI MPC might proceed with a modest cut at the October MPC,” the bank’s economist Radhika Rao wrote in a commentary on the Indian economy on Monday. The US Federal Reserve cut rates by 25 basis points recently.

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