Mumbai: Leading Indian corporates have welcomed Finance Minister Nirmala Sitharaman's announcement to reduce corporate tax, with many describing it as a "bold move" that would boost the economy and improve the country's business environment.

Udak Kotak, executive vice chairman and managing director of Kotak Mahindra Bank, said the government's decision to slash corporate tax is a "big bang reform," which would allow Indian companies to compete with those in lower tax jurisdictions like the US. " It signals that our government is committed to economic growth and supports legitimate tax abiding companies. A bold, progressive step forward," Kotak tweeted.

The government on Friday slashed basic corporate tax rate for domestic companies to 22% from 30%, while for new manufacturing companies it has been cut down to 15% from 25%. The announcement is part of a series of measures that the government has been making in the past few weeks to boost economic growth that fell to a six-year low of 5% in June quarter.

Revenue foregone because of the reduction in corporate tax rate and other relief measures announced will cost the government 1.45 lakh crore per year, the finance minister said.

Bringing tax-friendly laws, including reducing corporate tax, have been a long-standing demand of India Inc.

“I think it is a good move which addresses the cost of doing business in India and is a positive for the companies operating in India currently and for foreign investors thinking of India as an investment destination. However, I guess the challenge for the government is to find alternate revenue streams to support the infrastructure expenditure being planned," said T.V. Narendran, CEO and MD, Tata Steel

“The announcement for the new domestic companies incorporated on or after October 1, 2019 and making fresh investments in manufacturing, having the option of paying an income tax rate at 15% will unleash the entrepreneurial spirit of new India. The revised tax rate of minimum alternative tax (MAT) will pave the way for new investments from startups and MSMEs, creating a robust ancillary ecosystem," said Anil Agarwal, chairman, Vedanta.

Rajan Wadhera, president, Society of Indian Automobile Manufacturers (SIAM), said bringing down corporate tax to 15% for new companies will support investment and also foreign direct investment in the auto sector. "This is expected to give a big boost to Make in India for automobile industry," he said.

"This set of fiscal measures is expected to uplift market sentiments and improve demand for automobiles," he said in statement. These are indeed landmark announcements and would certainly help in reviving growth in the Indian economy, he added.

According to Sanjay Dutt, managing director and chief executive officer, Tata Realty And Infrastructure Ltd, the tax relief measures announced today was one of the biggest reforms of the government. "The government needed to send a strong signal to the market. They have finally accomplished to certain extent with this step of reducing corporate tax."

The stock market too has given a thumbs up to the announcements. At 1:35 pm, the Sensex was at 38,026.01, up 1932.54 points, or 5.35%, while the Nifty was at 11,276.55, up 571.75 points, or 5.34%.