Reserve Bank of India Governor Shaktikanta Das on Friday admitted that the latest economic growth data had woken everyone up, but expressed confidence that the next set of data for the July-September quarter would be better as the government had started spending again.
Speaking at India Today Conclave, Das said that the central bank’s analysis for the April-June quarter had predicted a growth of around 5.8% in Gross Domestic Product, with the worst-case scenario being 5.5%. Therefore, the 5% growth was a “big surprise”, he said.
Das said that the growth may have been poor in April-June because of the General Elections, which pushed down the government expenditure. Since the government has started spending again, the GDP data for July-September will hopefully improve, he said. However, Das said he could not confirm this until the Monetary Policy Committee meets in October for its bimonthly meeting.
Das said that the Centre’s decision to cut corporate tax rates earlier in the day was a bold move and highly positive for the economy.
India’s economic growth rate slipped to a six-year low of 5% in the April-June quarter. In the last few months, core sectors such as automobiles and manufacturing have slowed down gradually due to weakened consumer demand and dearth of investments.
Minutes before Das was speaking, Finance Minister Nirmala Sitharaman had addressed a press conference in Panaji to announce reductions in corporate tax rates for domestic companies and new manufacturing firms in a fresh bid to boost economic growth.
Domestic companies will now have an option to pay 22% tax, provided they do not avail of other incentives or exemptions. New domestic manufacturing companies can pay 15% corporate tax with the same condition, if they are incorporated on or after October 1, 2019, and start production no later than March 31, 2023. The government will forgo a revenue of Rs 1.45 lakh crore per year, Sitharaman said.