A roll out of National Retail Policy is important to provide framework and financial assistance to the industry
The year 2020 has been a grim year for humanity but the announcement of COVID-19 vaccine rolling out across the globe in the new year has ignited hopes amongst everyone. We are all hopeful of leaving behind all the negativity and starting afresh with Budget 2021.
Despite some quick thinking by our government and the Reserve Bank of India (RBI), the pandemic outbreak has resulted in declining revenues and high budgetary expenses due to which the fiscal deficit has increased to almost 12.1 per cent of GDP. However, the unorganized sector faced the majority of the brunt. Therefore, this year's budget holds extreme significance and it must set long term goals and aspirations rather than short term corrections. In the wake of an unprecedented year, the upcoming budget is expected to provide a roadmap for fiscal consolidation.
The retail sector is looking at Budget 2021 with a lot of hope as it needs some immediate provisions to set the tone for recovery while also waiting for some long-standing demands to be addressed. Some of the expectations that the sector has from the upcoming budget are:
Strengthening the digital framework – The Union government has been laying impetus on enhancing the digital infrastructure and Digital India has been one of the most ambitious initiatives of the government. COVID induced social distancing norms and contactless transactions have given a further boost to it. Therefore, it is the right time when the government should strengthen the existing framework that could make the customer experience more secure, and convenient.
Incentivizing savings – Amidst difficult times, savings have witnessed a downward trend in recent few years. Therefore, the government must emphasize increasing the domestic saving pool to foster future growth. In recent times almost all incentives have been removed prompting a spending boom, but Indian finance requires the bedrock of the typical Indian household savings.
Maintaining income tax rates and restructuring GST norms –Budget 2021 will need to continue on the strategic path chosen in the previous year, i.e. reduce consumption and increase investments. With this in mind, tax rates for higher-income groups were increased last year while dividends were also included as part of regular income, and the Dividend Distribution Tax was removed. This proved to be beneficial for the industry. Therefore, there is no need to make a change in tax slabs. Rather there is an ardent need to rationalize GST. The recent resilience in GST collections points to an increased shift to the organized sector from the unorganised. GST rates need to be simplified and the slabs need to be reduced to increase collections and participation. Along with this, there is a need to ease GST norms and reduce the GST rate to encourage people to spend more. This is even more significant in today’s scenario as consumers need to be given more money in their hands so that demand and consumption can be increased.
Bolstering Tier II and III markets – All thanks to urbanization and digital awareness, Tier II and III markets have witnessed rapid growth during the last two decades. These markets hold immense potential for expansion and growth. However, these markets still need a boost with respect to the infrastructure to attract organized retailers and global brands. This could be coupled up by relaxing FDI norms that may create a win-win situation for all.
National Retail Policy – This has been a longstanding demand of the industry, therefore, in order to provide a framework and financial assistance to the industry it is extremely important to roll out the National Retail Policy.
Incentives for new entrants – Apart from incentivizing the savings for the key players through various initiatives, there is an urgent need to foster new entrants in the sectors as they will gradually become important players in the future and play an important role in achieving the government's goal of becoming a $5 trillion economy by 2025.
The author is Wonderchef MD & Co Founder
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