“One of the major drawbacks that India had was high corporation tax rates. These tax rates take us closer to the tax rates that prevail in this part of the world. So, corporation tax rates coming down is a very bold and welcome measure and will augur extremely well for the economy,” Das said at the India Today Conclave in Mumbai.
Many Southeast Asian economies such as Malaysia, Indonesia and China charge 24-25 per cent corporation tax.
The finance minister 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, the finance minister said, has been done to promote investment and growth in the economy. Das also said he expects the second-quarter (Q2) growth numbers to be better than those reported in the first quarter (Q1) as Q1 was marred by low government expenditure because of the elections.
“In Q1, the government expenditure was very low because of the elections taking place. So, that pulled down the GDP numbers to a certain extent. In Q2, the government expenditure has picked up, so the numbers hopefully will be better,” he said.
GDP growth in Q1 slipped to 5 per cent, the lowest in six years. “At this juncture, all the stakeholders from the government, the central bank and the private sector need to play their role in pushing up growth in the economy,” Das added.
Ruling out an asset quality review of the struggling non-banking financial company (NBFC) sector, the governor said the RBI has been monitoring the top 50 NBFCs in India in terms of financial stability. “We have not asked any NBFC for an asset quality review, but they are free to do it on their own.”
He also said the NBFCs with good governance standards are able to raise funds from the market at pre-IL&FS crisis rates. He reiterated that market mechanism should be given preference to solve the crisis in the NBFCs sector. “The resolution process has to be market-based and in this, the banks and other lenders have a major role to play, because in NBFCs where there are major governance issues, the banks need to take a larger haircut,” the governor said, adding, “the banks will have to take a very balanced call”.
Earlier, he had also given an indication that with benign inflation, there is a scope of rate cut but the final decision will rest with the monetary policy committee which will meet in October.