RBI Governor Shaktikanta Das on Tuesday said the government's decision to slash corporate tax rates is a very bold measure and makes India an attractive destination for investment.
"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 media after meeting Finance Minister Nirmala Sitharaman.
Mr Das was in the capital to meet Ms Sitharaman ahead of the Reserve Bank of India's monetary policy committee (MPC) meet early next month to take a call on key interest rates.
"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.
"They (the domestic companies) can invest more. Some of them can de-leverage their liabilities which will add strength to their balance sheets," he said.
Finance Minister Ms Sitharaman on Friday cut the effective corporate tax rates to 25.17 per cent (inclusive of all cess and surcharges) from 30 per cent for all domestic companies. As a fiscal stimulus, the government cut the tax rates to promote investment and growth in the economy, and the measure which will cost the exchequer Rs 1.45 lakh crore.
The government had slashed the corporate tax rates to 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies as well as announcing and other fiscal reliefs in order to promote growth and investment.
Also, such companies shall not be required to pay Minimum Alternate Tax (MAT).
Mr Das last week had said the government had limited fiscal space to support growth but low inflation can help the monetary authority to ease policy rates to boost the economy. The RBI has already cut rates four times 110 points this year to support growth.
The three-day MPC meet will begin on October 1.
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