Day after warning against fiscal expansion, Das hails tax cuts

A day after cautioning government against any fiscal measures to pump-prime the sagging economy given its limited fiscal legroom, Reserve Bank governor Shaktikanta Das Friday hailed the massive tax giveaway to corporates, describing the move as "a bold measure that is highly positive".

In a major fiscal boost, finance minister Nirmala Sitharaman Friday morning slashed effective corporate tax rates to 25.17 percent inclusive of all cesses and surcharges for companies cheering everyone.

The 10 percentage points reduction in corporate taxes is worth 0.7 percent of GDP or Rs 1.45 lakh crore in revenue foregone, but will boost the bottomline of most companies by an average of 12 percent.

"These are definitely bold and welcome measures. It will augur extremely well and will be highly positive for the economy," Das told an India Today event here.

The governor did not speak about the fiscal impact of the massive tax giveaways, though.

Before the tax cut announcement, addressing the same event, he also noted that one of the major drawbacks that of our system was the high corporate tax rates and "today's drastic cut in the same will take the country closer to the rates that prevail in emerging economies such as Thailand, and the Philippines."
"If you see the MPC resolution...if you refer to my own minutes, we have clearly recognised that there are signs of growth slowing down. Accordingly, we started the cycle of interest rate cut as early as February this year. RBI has been proactive and ahead of the curve."
Urging government to frontload its budgeted spends and to focus on the quality of such spends, Das said, "the fiscal tool has to be used not by just expanding the expenditure in an unplanned manner but by focusing more on the quality of the spend and the positive thing is it is already happening."