The Indian retail industry is currently experiencing significant transformations driven by several key factors, including omnichannel push, technological advancements, sustainability, etc. These changes are reshaping how businesses operate and interact with consumers.
To fully leverage this potential, the industry must focus on several strategic areas, such as enhancing supply chain efficiency through advanced analytics and AI. This may significantly reduce costs and improve service levels. Investing in omnichannel strategies that seamlessly integrate online and offline experiences will be key to capturing the diverse Indian consumer base. Additionally, prioritising data security and privacy will be crucial as digital transactions and data exchanges increase in the country.
Furthermore, fostering innovation through incentives for startups and tech adoption can drive the next wave of growth. Government policies that support infrastructure development, especially in tier-2 and tier-3 cities, can unlock new markets and consumer segments. Finally, sustainability initiatives, such as incentives for green practices and sustainable packaging, can position the industry as a leader in responsible consumption, aligning with global trends and consumer expectations of least damage to the environment.
However, navigating challenges, such as regulatory complexities and economic fluctuations require resilience and strategic adaptation. This year’s budget is expected to address critical areas, such as enhancing consumer purchasing power, improving supply chain infrastructure, and fostering a competitive business environment.
The industry seeks measures that leverage tax collections (including rationalising GST rates, streamlining tax compliance) in order to provide necessary support, along with incentives for digital adoption and sustainable practices, and measures to bolster domestic manufacturing. The retail and e-commerce sectors are hopeful that the Union Budget 2024 will strike a balance between fiscal responsibility, combating inflation and propelling industry growth.
Here are some key areas to look out for:
- Building digital infrastructure: With the rapid digitisation of the consumer market, there is an expectation for significant investment in digital infrastructure. This includes enhancing internet connectivity, promoting digital literacy, and strengthening cybersecurity measures. Offering tax breaks on investments made in adoption of AI, ML, and blockchain, could significantly drive technological advancement.
- Extension of incentives for the manufacturing sector: To further promote manufacturing, the government may consider extending concessional tax rate of 15% for new manufacturing companies introduced in October 2019, by one year, from March 2024 to March 2025. This would encourage continued growth and investment in the sector.
- Opportunities to boost rural consumption: The Industry has been struggling with stagnant volume growth for last couple of quarters. Incentives like relaxation in direct tax rates, investment in rural infrastructure, favorable minimum support price for agriculture output can boost disposable income in the hands of the consumer. This can effectively help in improving the disposable income in the hands of the consumer and thereby boost consumption.
- Production-Linked Incentive (PLI) Scheme: The PLI scheme has significantly impacted various sectors in India. Its further extension to the leather, toys, textile and footwear industry will create more jobs and increase manufacturing. Recently, the Ministry of Commerce and Industry decided to reopen the application window for PLI scheme for White goods (ACs and LED lights) for 90 days driven by increased industry interest.
- Fostering global investments in retail: As global MNCs explore expansion in India, it is essential for tax and regulatory laws to be strategically aligned. This would facilitate smoother entry and growth for these companies, thereby contributing to India’s economic development by providing regulatory clarity and tax incentives.
- Providing upliftment to D2C set up: The D2C landscape faces significant challenges related to compliance complexities, including GST, TDS, and Angel Tax. Simplifying these processes would ease operational burdens for startups and MSMEs. To incentivise innovation, tax reliefs, employment-focused deductions, and subsidies, are anticipated. Furthermore, government initiatives supporting funding, loans, and digitisation can spur growth and sustainability in the sector.
- Rationalisation of Basic Customs Duties: To support the ‘Aatmanirbhar Bharat’ initiative and stimulate domestic manufacturing, stakeholders advocate for the rationalisation of basic customs duties on key imports, such as components for high-end mobile phones and consumer durables. This is crucial for keeping the sector competitive.
- Rationalisation of provisions relating to deduction and collection of taxes on sale of goods: As of now, the Government has mandated both buyer and seller to either deduct tax or collect tax respectively upon satisfaction of certain conditions. Fixing the obligation on any one of the parties will reduce compliance burden and enhance ease of doing business for companies operating in the consumer industry.
Financing Options for Retailers: Programs like the Pradhan Mantri MUDRA Yojana could be further promoted to provide financial support to small-scale kirana and brick-and-mortar stores, ensuring their continued relevance and growth.
This article first appeared in the Financial Express on 21 Jul 2024.
