On Friday, the finance minister (FM) unveiled a package of measures with a view to boost market sentiment, improve liquidity, reverse economic slowdown, assure tax payers of fair treatment and help some sectors overcome immediate problems. She assured two more instalments of relief or revival packages in the coming weeks.
How far these welcome announcements will help in the context of a worsening trade war between America and China that has rattled global markets and business sentiment is difficult to assess. Early Friday, China said it would impose tariffs of 5 per cent and 10 per cent on almost all the remaining US import on which it has yet to impose punitive levies. It also plans to raise tariffs on many items already subject to duties. These retaliatory measures on about $75 billion of US goods, mostly agricultural products, automobiles, apparel, chemicals and textiles, are to go into effect on September 1 and December 15, the same dates that the two new rounds of US tariffs on Chinese goods are to take effect.
Also, late Friday, US President Donald Trump announced an increase in existing and planned tariff rates by five percentage points on Chinese goods. More significant, he said: “We don’t need China and, frankly, would be far better off without them.” Going on to tweet: “Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME”, though he has no means to enforce that. Some companies are already trying to do so but find it difficult to disrupt supply chains that have developed over decades. Also, no other country has China’s huge and relatively skilled workforce, infrastructure and network of suppliers. Trump also attacked the chairman of the Federal Reserve (the American central bank) and the Chinese president as enemies of the US.
In her opening remarks, the FM referred to the trade war, weakening global demand, slowing of the US and Germany economies, and currency wars. But, said nothing about steps to cope with these developments and to save jobs in the country.
Perhaps she will address these issues in the coming weeks. Or leave it to the commerce minister to talk about these when he unveils the new Foreign Trade Policy, sometime late September or early October.
The FM, however, did say that micro, small and medium enterprises will get pending refunds of goods and services tax within 30 days. And, going forward, these refunds will be settled within 60 days.
She announced it as if this is a greatly reformist, path-breaking, move. It is a reflection of the times that giving one’s legitimate dues in time should be touted as a matter of great indulgence. And, receiving these a matter of grateful celebration.
The FM seemed chastened by widespread criticism of economic and tax policies. And, conveyed a willingness to listen to the stakeholders and make course correction.
Eagerness to recognise the role of wealth creators, take steps to dispel fears of tax terrorism, infuse greater liquidity in the system, rollback of draconian provisions to criminalise economic offences and withdraw surcharges that should not have been imposed in the first place shone through her press conference.
The seeming attitudinal change at the top levels should come as a relief for businessmen and other stakeholders.