With budget 2020 being around the corner, there is hope that the new policies will have a positive impact on the retail and the consumer sector. India is the 5th largest global destination in the retail space. India’s retail sector is the most dynamic sector in recent times, there have been significant changes and the sector witnessed high consumer activism, innovative supply chain models, marketing and advertising activities and introduction of new players in the market.
A joint report by Assocham and MRRSIndia.com suggest that the Indian retail / consumer market is set to cross the US$ 1 trillion mark by 2020 due to rise in per capita income.
Below are the eight challenges which were faced by the retail sector in 2019:
- Higher GST rates for retail players have been resulting in accumulation of non-refundable credit due to substantial spend on advertising and branding spending capacity.
- There has been multiplicity of laws and regulations governing the sector
- Restrictive conditions under the foreign direct investment (FDI) policy for single-brand retail trading leading to ambiguities and hurdles for the e-commerce sector. Improvising conditions and minimalising restrictions will further give a boost to FDI.
- Lack of clarity and understanding of regulations/guidelines governing imposed on online retail trading.
- Lack of proper physical and digital infrastructure, developed supply chain resulting in inefficiencies and higher costs.
- Growth in retail sector has resulted in a growing demand in the real estate sector thus resulting in a rise in overall real estate cost
- Lack of effective supply management. Solid infrastructure and developed supply chain will improvise the foundation and overall profitability
- Lack of incentives for the new players in the retail market.
Budget 2020 gives an opportunity to the government to address the main problems faced by the retail sector and push the economy towards higher growth. Some of the expectations from the government in Budget 2020 are listed below:
- GST slab should be simplified and successful / structured implementation of new mechanism that will help ease the process. We also look forward to reduction of GST to encourage consumer spending.
- The budget may focus on simplification of the government laws will have a positive impact on the sector and will give freedom to try new techniques and introduce new trends. Also clarifications on open issues and introduction of measures for ease of doing business would be of great help.
- The budget should consider educating the retailers and traders and clarifying regulations for retailers ensuring sound risk management practices and KYC (know your client) mechanisms.
- Promoting partnership and collaboration for accessing new channel capabilities, digital technologies and easier entry into new markets may help in optimising costs.
- A further initiative by the government by introducing laws and rules to reduce the real estate cost would prove to be of great help to the common man who looks forward to live in beautiful homes or for investment purpose. Stabilisation of tax policies on properties would also be beneficial since there is a constant change in rate slabs.
- Introducing new incentives and bold reforms will encourage the newbies in the retail industry to expand their activities across various platforms.
- Supporting rural growth and expecting positive initiatives like MGNREGA, increase in the MSP for select crops, focus on electrification of villages, farmer friendly technologies, etc.
- We expect new entrants/ investors in the FMCG space with introduction of simplified tax structures, stability in custom duty and a less aggressive tax administration.
- A special start-up growth fund to support start-ups will boost the start-up ecosystem immensely.
- We expect the budget to provide impetus for digital payments (Debit and credit cards,UPI)