The government's recent decision to cut corporate tax rates is a bold measure and augurs well for the economy, Reserve Bank of India (RBI) Governor Shaktikanta Das said on Tuesday.
"It is a very bold measure and it is a highly positive step. India's corporate tax now becomes very competitive compared to other emerging market economies in ASEAN and other parts of Asia," he said while talking to reporters here.
"So far as international investors are concerned, I think India definitely stands in a very competitive position and will be able to attract higher investments," said Das.
He added that lower corporate tax will leave domestic companies with more cash to undertake fresh capital expenditure. "They can invest more. Some of them can deleverage their liabilities, which will add strength to their balance sheets."
Many southeast Asian economies like Malaysia, Indonesia and China charge 24 to 25 per cent corporation tax.
Finance Minister Nirmala Sitharaman on Friday slashed the effective corporate tax rates to 25.17 per cent (inclusive of all cess and surcharges) from 30 per cent for all domestic companies.
This was done to promote investment and growth in the economy, costing the exchequer Rs 1.45 lakh crore at a time when the GDP growth slumped lower to 5 per cent in the April to June quarter as against 8 per cent in the year-ago period.
Das was in the national capital to meet Sitharaman ahead of the RBI's monetary policy committee (MPC) meet early next month to take a call on key interest rates.
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