India’s retail market is estimated to reach $1.5 trillion by 2030 from $0.8 trillion in 2020, a testament to the strong consumer power of over 1 billion Indian consumers as they move up the income pyramid.
The retail sector has been among the hardest hit, both globally and in India, due to pandemic-induced uncertainties. Subdued sales and cost pressures were driven by sluggish consumer sentiment, declining social engagement as well as supply disruptions, shutdowns and mall closures.
While a large majority of the industry has embraced different methods of reaching out to customers using door-to-door delivery, e-commerce, direct-to-customer sales models, growth and profitability have been a big challenge.
The strategic relevance of the retail sector in terms of employment, representation of MSMEs, traders, farmers, processors and the wider supply chain ecosystem is often underestimated.
The retail sector is the front-end of several business segments, directly and indirectly having a significant impact on employment, income, socio-economic stability and consumer power.
This budget should provide improved consumer confidence and support for the retail sector during this period as the sector stabilizes back to pre-covid levels.
On the consumer side, the budget could consider boosting consumer confidence by allowing larger tax deductions for health care expenses.
Additional flexibility could be provided for expenditure related to hospitalization and intensive care. In a bid to boost consumption, the 2022 budget should aim to put higher disposable income into the wallets of middle-income and rural consumers, who are currently facing inflationary pressures and disruption from the ongoing pandemic. .
On the retail side, the industry hopes for an acceleration of the implementation of the national retail policy, giving the sector an industry status.
This would enable multiple improvements related to the regulatory burden, the need for licenses and the digitization of the sector. The sector could also benefit from support in the form of an accumulated loss carryforward to allow companies to settle debts related to unsold inventory, wages and rents on a priority basis.
In addition, for companies facing financial difficulties, any support in the form of preferential lending rates, an extended healing period for companies in difficulty. These could be interventions that could help the sector through the year.
Overall, the sector has high expectations that the 2022 budget can resolve some of the current problems faced and establish a roadmap for formalization and efficiency.
(The author is National Leader – Consumer Products & Retail, EY India.)
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