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Finance & Economy | News & Insights

RAI Budget Recommendations 2024-25

Published: December 16, 2024
Author: TEXTILE VALUE CHAIN

Everyone agrees that India’s economy is one of the fastest growing in the world, and a large portion of this growth can be ascribed to the expanding middle class, which is driving economic growth through retail consumption.

One of the main drivers of India’s economy, retail contributes over 10% of the country’s GDP. By 2032, the retail market in India is projected to grow from its current $1 trillion valuation to $2 trillion. With 1.4 billion inhabitants, India is one of the retail markets with the greatest rate of growth in the world.

The creation of jobs in the retail sector and related industries is another aspect of the retail industry’s contribution to the expansion of the Indian economy. This sector employs about 50 million people. In addition to generating indirect job opportunities, the retail industry is the one with the quickest rate of job growth and is second only to agriculture in terms of the number of people it directly employs.

One important feature of this industry is that its benefits are not limited to particular socioeconomic classes; rather, retail can help a variety of institutions and the general public. Because modern retail is more transparent, its contributions go to the exchequer.

We at the Retailers Association of India sincerely support the government’s objective to promote equitable growth for India, and the government has made significant efforts to revive the sector with the recent reforms. The retail industry truly has the capacity to support the government’s mission.

Certain topics are identified in the RAI Pre-Budget Memorandum 2023-24 as needing government attention because they may offer the impetus required to spur the sector’s growth. To strengthen the retail sector and boost the nation’s GDP, RAI advises the government to take into account the following important factors.

  • Boost Retail and Consumption 

To ensure the growth of the sector, the Union Budget for FY 23–24 should focus on generating demand and spurring consumption by offering benefits or concessions in the form of lower taxes. It will boost the overall consumer sentiment and benefit the retailsector. Consumption equals to Development. Tax benefits and relief to individual taxpayers will increase the monthly disposable income and support consumption. 

Further the budget must prioritize growth-oriented measures to stimulate demand and consumption. The budget should outline supportive policies, simplified regulations, skill development and simple goods and services tax (GST) norms to aid in the development of the retail industry.

  • Provide low-cost finance to retailers

There is a need to provide lower interest rate to the retailers through the special announcement in the budget to assure easier financing for the Retail businesses. The government should allocate a special fund and formulate a special trader finance scheme with SIDBI to help millions of independent retailers across the nation by declaring low-cost loans and relaxing some industry guidelines. 

III. Encourage Innovative and Convenient Digital Payment Methods 

Consumers may now make payments more easily thanks to the Unified Payments Interface (UPI) and other digital payment options. In India’s semi-urban and rural shops, UPI alone saw a 650% increase. The same has supported eliminating the burden in the cash-based economy like India and making it simpler for corporations to enhance their operations in the online segment. It is required to assist these upgrades in the technology which makes it simpler to do digital payments. New and easy modes of digital payments must be supported by the government by announcing the focused extent. Further, there is a need to promote Digital transactions by giving waiver of MDR/subsidized MDR on use of the debit card. 

  • Consider Retail as an essential service 

F&B retail sector needs to be considered as a priority and an essential service. Subsidies and benefits should be given on land rates and other necessities such as electricity. 

  • Expedite National Retail Policy to enable ease of doing business

There is a need to expedite the formulation and implementation of National policy. We believe that such a step would provide a substantial boost to the retail sector and facilitate ease of doing business. 

  • Extend all the MSME benefits to retail traders 

The Govt has included retail and wholesale trades as MSMEs, and they are allowed to be registered on Udyam Registration Portal. However, benefits to retail and wholesale trade MSMEs are restricted to Priority Sector Lending only. We recommend that retail and wholesale traders should be eligible for all benefits available to other MSMEs.

VII. E-enablement of MSME retailers 

There is a definite need to help retailers in India modernize. The first step to modernization is the use of Point-of-Sale Machines (also called as POS machines) as these help retailers in making bills for customers and also allow the owners of the stores to allow a non-family member to man the cash tills without the worry of embezzlement. 

The uses of the above machines are many. The key uses are: 

  1. It allows owners of businesses to employ managers who can manage the business without losing control over basic data of sales. 
  2. It allows a quick update of stock, sales, and intake and hence helps manage sales and inventory 
  3. It helps keep a record of customers and allows for a more useful CRM (Customer Relationship Management) 
  4. The bills made from such machines create accountability to customers and ensures that retailers take responsibility for what they sell to customers. 

VIII. Model Shops and Establishments Act 

The Central Government introduced ‘The Model Shops and Establishment (Regulation of Employment and Condition of Services) Act 2016 (hereinafter referred as The Model Bill) on 29th June 2016 which has been one of the keys asks of the Retailers Association of India for the overall benefit and growth of the Indian retail sector. The Model Bill is a progressive move by Shri Narendra Modi Government since it enables the states to choose to keep shops and other such establishments open 24×7 all through the year. This gave a substantial boost to employment generation and will also benefit the consumers in terms of more convenience and accessibility. 

The Government of Maharashtra and Gujarat has recently amended the Maharashtra Shops & Establishments Act 1948 in line with the Model Bill. 

The Government should encourage and incentivize other states to adopt the Model Act.  Retail businesses also need EDC (Electronic Data Capture machines) for acceptance of various bank cards and other digital payment devices. This helps in the acceptance of digital money and also promotes an accountable trading environment. In our opinion, any promotion of the use of Point-of-Sale machines are a good way to move the country and its citizens towards a fully accounted economy. 

Small traders have to be encouraged to use at least EDC machines so that they can accept digital payments without worry. Efforts should be made to ensure that all retailers in the country use EDC machines and also that the cost of accepting Digital paymentsis never more than the cost of accepting cash. The Government may want to create free/subsidized dispensation of such machines in the country. This can be done in stages – around 25 lakh machines to start with can be a good start. It will also help government as these retailers  will register under GST. 

Efforts should also be made to encourage retailers to get POS machines with good software  for sales bills and sales accounting. Reimbursement of money for such POS to small retailers  can be a good way to encourage adoption. Allthese software’sshould have an inbuiltsecurity  system and robust accounting standards so that an audit trail of bills is feasible. Some care needs to be taken to certify acceptable POS machines and software. 

  • EPCG for Retail Sector 

We also recommend reintroducing “EPCG for Retail Sector”, to create modern infrastructure in retail sector. Concessional duty benefits under EPCG scheme shall be extended for import or capital goods required by retailers having minimum area of 1000sq. meter. 

  • Risks of Proposed GST Hike on Products based on price range 

The proposed GST rate hike on apparel, footwear, handbags, cosmetics, watches, and other premium products could have significant repercussions on the formal retail sector and consumer sentiment.  Such increases may jeopardize the formalization of trade, encouraging a shift toward unorganized  markets. Additionally, this move risks undermining the Government of India’s Make in India initiative,  delaying the domestic growth of the retail sector and impacting employment opportunities. To achieve higher collections, the government should adopt a more balanced approach that safeguards the formal retail ecosystem and preserves consumer confidence.

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