'Cut in corporate tax rate was needed to spur investments, boost growth'

New Delhi: Chief Economic Adviser K V Subramanian on Friday said the cut in corporate tax rate was required to boost investments as the virtual cycle that spurs growth in the economy has not been functioning as expected for the last few quarters.

For us (India) to achieve the goal of $5 trillion economy by 2024-25, and $10 trillion by 2030, we need to press the paddle on structural reforms, he said and explained the host of measures that the government has taken in recent times.

Economic survey released in July this year laid out strategic steps for India to become a $5 trillion economy with special emphasis on investment as the key driver for the economic development with consumption being the force multiplier, he said. "Investment is important for enhancing productivity in the economy and it is productivity that eventually then improves wages, creates job, enhances exports and then the combination of all these gives the purchasing power in the hands of the consumers which is what manifests as demand.

"The anticipation of demand is what the companies use to make investments and that is how this virtual cycle goes. Over the last few quarters this virtual cycle is not moving as fast as it was when we were growing at 7 per cent plus...," he said at the 'India Economic Forum' Skoch event here.

Explaining tax dynamics for corporations, he said corporate tax is first paid by a company and whatever is left as capital gains or dividends, the individuals are then taxed

later. "One of the important things to recognise is that there is double taxation... Which is why, we at the government went ahead and reduced the corporate tax rates," Subramanian said.

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