The Indian retail industry is poised for unprecedented growth, with projections indicating a surge from $1.1 trillion in 2027 to a staggering $2 trillion by 2032, showcasing a robust CAGR of 25 percent. As this dynamic sector plays a pivotal role, contributing over 10 percent to the nation’s GDP and employing approximately 8 percent of the workforce, the upcoming budget holds immense significance in unlocking its full potential.
Last year’s positive and forward-looking budget, focusing on the growth of rural India, set a tone for sector development. However, challenges such as inflation, erratic rains, and rural slowdown impacted consumer spending.
To counter these challenges, the forthcoming budget is expected to introduce measures that boost disposable income and rural demand, including tax cuts for lower income brackets, increased agri-infrastructure investment, and GST rate rationalization on essential goods.
Furthermore, the retail sector anticipates support for omnichannel retailing, infrastructure development, and ease of doing business reforms. Emphasizing domestic manufacturing and PLI schemes for consumer goods can enhance the industry’s resilience against global headwinds.
In essence, the industry seeks a budget that prioritizes consumer sentiment and facilitates sustained growth for both online and offline retailers.
Key Expectations and Areas to Watch in the Budget:
- Streamlining the Indian Retail Landscape: The introduction of a comprehensive National Retail Policy is eagerly awaited. This policy aims to enhance the sector’s global competitiveness, unlock affordable credit, and propel digitization and modernization within the trade. It promises improved infrastructure, skill development, workforce productivity, and a robust grievance redressal mechanism.
- Shaping a Digital Future: Acknowledging technology as a cornerstone for retail and ecommerce, the government is urged to explore incentives for businesses innovating digital technologies. Tax incentives can drive higher usage of AI/ML and blockchain technologies.
- Rationalization of Basic Customs Duties: To promote ‘Aatmanirbhar Bharat’ and boost domestic manufacturing, stakeholders anticipate the rationalization of basic customs duties on imports, including crucial components for high-end mobile phones and consumer durables.
- Extension of Incentives for the Manufacturing Sector: A proposal to extend the concessional tax rate of 15% for new manufacturing companies beyond the current deadline of March 2024 to March 2025 to further boost the manufacturing sector.
- Clarity on Tax Deduction Provisions and Non-Resident Payments: Recommendations to amend Significant Economic Presence (SEP) provisions to exclude normal import of goods and, if not possible, prescribe attribution rules for importers to compute non-resident seller income and deduct TDS.
- Ensuring Disposable Income: The industry calls for the rationalization of GST and Income Tax rates to leave higher disposable income in consumers’ hands, thereby revitalizing consumption. Increased outlay for rural support programs is also highlighted.
- Budgeting for Retail Renaissance: Expectations include financial support for independent retail through a revamped trader finance scheme in collaboration with SIDBI, paving the way for a powerful catalyst for Indian retailers.
he synergy of traditional and digital retail, combined with strategic budgetary measures, has the potential to position India at the forefront of the global retail landscape. The realization of a $2 trillion retail economy by 2032 hinges on the right blend of policies, investments, and support fostering a thriving and inclusive retail ecosystem.