'Budget has the potential to trigger consumption to some extent at bottom of the pyramid'

By Kumar Rajagopalan,

All eyes were set on Budget 2021-22 for the key role it will play in accelerating revival of the economy, to raise and capture the pace that leads to sustainable growth. Considering all that happened to the country’s economy in the last one year, the content of the Budget speech was potent in terms of what it delivered.

The retail industry was almost squashed during the pandemic, and its ripple effect was felt by all stakeholders down the consumption value chain.

As the economy opens up, it is now slowly getting back on its feet. At this juncture, all efforts are required to boost the local economy and help revive retail, saving millions of jobs.

Though retail businesses have started to recover at a quick pace, this momentum needs to be sustained.

Initiatives for all

The Budget has several initiatives which touch all segments of the society – women, farmers, entrepreneurs, rural and urban consumers - to help sustain the momentum of recovery and growth.

The positives for retail are the overall thrust on ease of doing business, and compliance and infrastructure development.

There are a host of substantial announcements that will enhance logistics capabilities of retailers, which are welcome as retail is heavily dependent on easy movement of goods and people.

The on-going pandemic has put a substantial financial burden on the government. And it was feared that additional taxes may be levied to help the government ease the economic strain.

The good news here is that while there is no significant change in income tax slabs for the salaried, no additional tax has been imposed either.

Tax Audit Limit enhancement welcome

The changes to process of appeals and assessments will bring relief to businesses from harassment.

Increase in the Tax Audit Limit to Rs 10 crores from Rs 5 crores for those having less than five per cent cash transactions will not only help small retailers but will also promote digital transactions.

Emphasis on growth drivers

In addition to infrastructure, a major emphasis was put on healthcare, public spending on rural segments, public distribution and transport.

All these are good initiatives as, in the medium term, they are likely to boost the country’s growth potential.

The big push on spending is likely to give a fillip to key growth drivers. And though it is not apparent, this Budget does have the potential to trigger consumption to some extent, at the ‘bottom of the pyramid’.

Boost for retail, employment

The apprenticeship programme has been great source of skilled manpower to the industry and a big source of employment to the country’s youth.

The allocation of additional Rs 3,000 crores towards this programme is a good move as retail industry, which is already greatly benefited by the National Apprenticeship Promotion Scheme (NAPS), will further benefit from the fresh infusion of skilled talent.

The Government has proposed to rewrite the definition of ‘small companies’ under Companies Act 2013. Now, companies with capital of less than Rs 2 crores and turnover of less than Rs 20 crores will be considered small companies.

This will greatly help small retailers by easing their procedural and compliance burden.

The Retailers’ Association of India (RAI) believes the government will soon amend the MSME Act to allow retailers to register as MSMEs so that retailers too can avail of all the benefits available to other MSME businesses.

The extension of tax holiday by one more year is a welcome news for retail start-ups and innovators.

On the import duty front, exemptions on some products have been withdrawn. This will impact retail businesses that are dependent on import. Such businesses may have to review their sourcing policy and look at sourcing from within the country.

Women form a large part of the retail workforce. The emphasis on ease of doing business by allowing women to work in all categories without restrictions is a very welcome move.

The proposal to review more than 400 exemptions to customs duty effective October 1 will lead to a revised customs duty structure that is free of any distortion. It will remove ambiguity benefiting retailers who import goods.

Growth-oriented Budget

Overall, it is a growth-oriented, well balanced and progressive budget. It is a popular Budget without being populist.

It is a right step towards strengthening the economy and in the direction of Aatmanirbhar Bharat.

Consumption drives the economy, and retail is the gateway to consumption. Retail in India which is sized around $854 billion continues to be one of the country’s largest industries that makes up for over 10 per cent of the GDP.

Retailers are hopeful of achieving about 85 per cent of pre-Covid levels of business in the first six months of the year 2021.

Although globally, Covid-19 vaccinations have started, the pandemic situation may take some more time to completely settle, and thus retailers should move ahead with cautious optimism in 2021.

(The author is Chief Executive Officer, Retailers Association of India)