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The consumer and retail sector showed tremendous signs of recovery in 2021, after going through innumerable problems of supply-chain disruptions, high input costs, low consumer sentiments, etc. However, with the sudden spurt in COVID-19 cases, concern has once again risen with regards to the growth momentum of this industry which to a great extent depends on consumer confidence and spending ability.
Budget 2022 holds great hope and significance for a complete revival of the sector. To begin with, the Budget should set the tone for the National Retail Policy’s implementation, which must be expedited to harmonise multiple laws that impede the sector’s ease of doing business. A process for digitisation/consolidation of the various requirements of the Acts would be a welcome move.
Studying the success of Production Linked Incentive (PLI) schemes, the government should consider rolling it out to new sectors, such as toy manufacturing, footwear, as well as personal care, and cosmetics. MSME is a major contributor to the success of the consumer and retail sector in India. Collectively they contribute 29 percent to India’s GDP, but usually face a challenge with financing and people development issues.
Additional allocations for providing credit and financial assistance for the growth of MSME’s, as well as focussed initiatives related to the skill development of MSME segment will also help in providing an overall push for the sector.
For India to compete on the world stage, it will have to increase its investment towards efficient supply chains, packaging solutions as well as research and development. With the right government support in terms of easier access to subsidised capital as well as tax incentives, private sector players can focus on creating more value-added technological innovations as well as robust infrastructure. Creating a robust ecosystem of industry, startups, government-funded R&D will be extremely important for the success of the prime minister’s vision of Atmanirbhar Bharat.
The consumer and retail sector is looking at more effective ways to ease the compliance mechanism under the GST regime. The sector is hopeful of an implementation of an efficient tax refund process to prevent credit blockage. At the same time, India Inc is also seeking more clarity on the input tax credit, followed by supply and value of supply.
On the Income Tax front, the sector is looking for some special exemptions to enhance and boost the spending capacity of the people in the current fiscal. More liquidity in the hands of consumers has a direct positive impact since it increases the consumer’s propensity to spend. Increasing allocations under MGNREGA will improve liquidity in the rural markets and in turn will improve the rural demand. Improving digital connectivity in rural India will also give the e-commerce industry a huge push, tapping into the benefits of rural market penetration. Relaxed FDI norms in multi-brand retail will create a more conducive environment for the industry.
Although the nascent economic recovery has been jolted by the third wave, these measures will give a fillip to the sector. Apart from creating more employment and entrepreneurial opportunities, it will bring the $5 trillion economy vision closer to actualisation.
This article was originally published on Firstpost.