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India Inc reacts to easing of local sourcing norms in single brand retail

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Finance Minister Nirmala Sitharaman on Friday presented her maiden budget and the first of the Modi Government in its second term.

She announced that FDI inflows into India have remained robust despite global headwinds.

“Global FDI flows slid by 13 percent in 2018 to US$ 1.3 trillion from US$ 1.5 trillion, as per the world investment report. India’s inflows remained strong at US$ 64.37 billion marking a 6 percent growth over previous year. I propose to further consolidate the gains in order to make India a more attractive FDI destination,” she said.

“Local sourcing norms will be eased for FDI in single brand retail sector,” she added.

Reactions from industry leaders:

Peter Betzel, CEO, IKEA India

“The Indian Government’s priority to bring about ease of doing business for companies is encouraging. IKEA is committed to increasing local sourcing from India.

IKEA has ambitious and optimistic plans to work with affordability and offer everyday low prices for the many people in India. While we await the exact fine print to assess the impact on us, we believe any positive move will encourage FDI and grow the industry even more in India.”

Janne Einola, Country Manager, H&M India

“While we don’t see the details of the proposal currently, we are happy to see the intent of the government to ease sourcing norms for FDI in single-brand retail to drive ease of doing business in India.”

Sanjay Sethi, Co-Founder & CEO, ShopClues

“A well-calibrated budget comprising growth-oriented measures with special focus on attracting global and domestic investments and ease of doing business for Start-ups. This will certainly lead to infrastructure development, digital empowerment & create more jobs. Capital gain exemptions for a start-up will further boost the investments in the economy.

Government’s vision to make India a 5 Trillion Dollar Economy in the next few years is welcome and  doable with industry participation. Announcements of easing sourcing norms in Single Brand Retail will give a further boost to domestic manufacturing and job creation.”

Ramesh Nair, CEO & Country Head, JLL India

“Relaxation in the existing norm of 30 percent local sourcing for single brand retail has been one of the key demands from foreign investors keen on putting money in single brand retail in the country. Budget 2019 has proposed to ease this norm. This would make the segment more attractive for foreign players and investors.

Budget has allowed foreign portfolio investors (FPIs) to subscribe to listed debt papers of REITs and InviTs. This will broaden the investment options for foreign investors and henceforth, spur higher flow of funds. FPI investments in REITs through debt papers will enable REIT players to increase the asset portfolio and make REIT investments more attractive.”

Priyanka Gill, Founder, POPxo

“The mention of start-ups in the full budget in such a clear manner is certainly a boost for the whole ecosystem. It is encouraging to see an optimistic approach on promoting start-ups by solving their issues, getting in touch with the start-ups and investors directly. Sitharaman’s focus on boosting FDI in media, and single brand will arrest the decline of FDI trend and directly push growth of media and private label markets in Indian start-up economy. The relaxation in Angel Tax, filing returns and tax compliance is a relief and will boost the confidence of doing businesses in India. Proposal of starting a television programme, within the Doordarshan bouquet of channels, exclusively for and by start-ups will foster entrepreneurship and in turn create job opportunities. Modi 2.0 commitment to building women-led policies to further women entrepreneurship is encouraging. I must say overall Sitharaman has struck the right chord and look for affirmative actions from the government.”

Other Reactions:-

Vikram Agarwal, MD, Greendot Health Foods Pvt Ltd (Cornitos)

“Very encouraging budget for SME/ MSE sector. With government’s initiative ,farm output has increased which leads to promotion of Agri processing industry. We have planned to invest in developing value added healthy agro based products. Another big policy put forth by the finance minister on ‘One nation One grid’ for easy power availability at one price across states is also very stimulating for the industry.”

Samir Misra, COO, V-Mart Retail

“Laying out a clear road map for India to become a 5 trillion economy, the economic survey and the budget is rightly emphasizing on driving private investment, job creation, unlocking the entrepreneurial energy, and spurirng economic activity in small towns and rural economy. At a macro level, this is good news for retail sector, which is entirely dependent on consumption expenditure in the economy. Also, in addition to creating a long-term conductive macroeconomic environment, retail sector-friendly measures introduced in the budget, e.g. pension scheme for small traders and retailers, and easing of local sourcing norms, are well-timed, with the right ‘signalling’ effect and inclusive in their scope.”

Kausshal Dugarr, Founder and CEO, Teabox

“Government keeping ‘Gaon, Garib and Kisan’ at the center of everything and since we deal with agriculture produce tea, which is a labor-intensive industry and one of the biggest employment generators in our country, such approach will go a long way in helping the huge labor force working in the tea plantations based in remote locations across the country. Multiple initiatives have been proposed in this budget to double the farmers income through various initiatives such as creation of 10,000 new Farmer Producer organizations to ensure economies of scale for farmers over the next 5 years, innovative pilots of ‘Zero Budget Farming’ to be replicated across the country for doubling farmers income, dairying through co-operatives to be encouraged by creating infrastructure for milk procurement, processing and marketing. Such initiatives, if implemented will lead to a strengthening of the rural economy which in turn, will result in the overall growth of the country.

Some encouraging points of the new budget are encouraging proposals for startups – The finance minister proposed easing angel tax for startups. This coupled with a vibrant ‘Stand Up India’ scheme will provide a boost to the start-up ecosystem in India. Further, start-ups won’t require scrutiny from Income Tax department with a 2 percent interest subvention for GST-registered MSME on fresh or incremental loans. There is a proposal for a dedicated television channel for start-ups. New payment platform for MSMEs is to be created with a plan to extend pension benefit to retail traders with annual turnover less than Rs 1.5 crore.

Overall it is a non-populist holistic budget keeping ‘5 Trillion Dollar Economy in next 5 years’ in mind.”

Dinesh Chhabra, CEO, Usha International Ltd.

“We welcome the union budget which will boost the country’s development in the coming years, particularly in rural markets. With the economy growing and a rise in disposable income, this news ahead of the festive season will certainly bring cheer to all stakeholders in the consumer durable sector – companies, partners, and customers – and we are optimistic that this will lead to a spur in the growth in the consumer durables category. We also welcome and are hopeful that the announcement of pension benefits to 3 crore shop owners under the new Pradhan Mantri Karamyogi Mandhan Scheme will bring some relief to the small retailers.”

Bhuman Dani, Founder, GL Co.

“It’s a great budget for the startup eco-system. Finally, there seems to be a resolution on the Angel Tax issue. The extension till FY21 for capital gains exemptions from sale of residential house for investment in start-ups also is a massive positive sign for entrepreneurs and investors in the start-up community.”

Samarth Setia, CEO & Co-Founder, Mr Milkman

“A great move by the government on the Angel Tax. Startups can now focus on growth and innovation without having to worry about being dragged into such complications. For a very long period, there has been a huge gap between the skill set required by the Industry and what was being provided through the colleges of our country. It was a much-needed push which the government is now taking, to improve skills of youth in technology areas like AI and Big Data”.

Mithun Appaiah, CEO- Innovative Foods Limited, Brand Sumeru

“It is a very good step by the government where they are increasing farmers’ income by promoting food processing and farm exports besides addressing certain taxation issues. There is a need to promote food processing and allied farm activities like animal husbandry, fishery and poultry.

The initiative on supporting private entrepreneurs which will drive a value-addition to farmers produce and for those from allied activities, is a welcome step which will also benefit the F&B industry.

One of the initiatives which could have been taken by the government was to provide subsidies or incentives to exporters for advertising their products by around 50 percent that would help them proliferate their exports. Expanding cold chains, food parks and warehouse especially in hilly states would also help the food companies to expand their businesses along with employment opportunities.

The proposal where funds raised by start-ups doesn’t require scrutiny from Income Tax Department is also a boost to the startup community. E-verification mechanism for establishing identity of the investor and source of funds will help the budding entrepreneurs.”

Vivek Karve, CFO, Marico Limited

“The Union Budget announced by Honourable Finance Minister tables a dream of building a 5 trillion India in the next few years. Towards this aspiration, conscious of the need to create the physical and social infrastructure, the Finance Minister has allocated substantial budgets towards agriculture, rural, women, education and physical infrastructure. The focus has been on the belly of the country comprised of small & medium size businesses and the middle class. These, along with some of the measures proposed to infuse liquidity in the economy, are expected to restart the growth engine and thereby provide the much needed fillip to consumer demand in the country.”

Ramesh Kapoor, Chief Finance Officer, Numero Uno

“The budget by and large has been a balanced , on one hand it is focusing on making 3 trillion economy by 2020, and housing for poor, rental laws, labour laws ,electricity and clean energy, infrastructure development etc.

But we will have to see the fine print as far as the rental and labour laws are concerned.

The proposal to bring under 25 percent tax ambit companies having turnover up to Rs 400 crore from Rs 250 crore earlier is good, however this should have been coupled with bringing down MAT rate and 25 percent rate should have been applicable to all companies.

Recapitalization of PSU banks will help them come out of PCA and make them lend more to the economy. In addition government has extended helping hand to NBFC’s and more powers to RBI to regulate them.

The will ease liquidity issue to some extent , but they have not addressed the insolvency issue plaguing the NBFC’s.

Further opening of FDI in aviation, media, insurance sector would be better for the sectors, tax incentives for affordable housing, EV’s.

Faceless assessment of tax returns would go in long way in reducing the corruption and increase the compliance.

However increase in the fuel prices would have cascading effect and would not help in increase in the consumption, and at the same time no relief to salaried class in terms of tax rate, TDS, standard deduction there are no specific steps for job creation.”

K John Baby, CEO, Funskool India Limited

“The Government’s move to continue with the policy of phased reduction in Corporate Tax rates, is a welcome step. The widening of Annual Turnover from Rs 250 crore to Rs 400 cror will reduce the tax liabilities for a large number of companies and boost profits in the long term. We welcome the Government’s initiative to crack down on nefarious activities and unfair trade practices that have availed undue concessions and export incentives, in the past. The fully automated GST Refund Module and Multiple Tax Ledgers for a taxpayers, are few steps which will bring transparency in the retail sector. Additionally, the Government’s scheme of the Pradhan Mantri Kaushal Vikas Yojana, will help create a large pool of skilled manpower and avoid skilled Labour shortage in the future.”

Ashish Gurnani, Co-founder, PostFold

“In the new budget presented by our Finance Minister Nirmala Sitharaman, she has envisioned India to be transformed into a 5 trillion dollar economy. It is pivotal that this transformation happens through the digitization, including the payments ecosystem. Usage of digital payments will cut costs for e-commerce of start-ups such as PostFold, boost growth and provide transparency of accounting. Successful implementation of initiatives of digitization will also lead to more consumers from tier 3 and tier 4 cities to open up a larger market for e-commerce players.”

Deepanshu Manchanda, Co-Founder and CEO, ZappFresh

“We hail the decisions announced in this year’s budget. The budget has presented various policies and measures which will go a long way in strengthening the startup ecosystem in India. Proposing norms to ease FDI in start-ups, excluding start-ups from angel tax assessments, boosting job creation and skill development are all great measures in giving impetus to the startups.

At ZappFresh, we work directly with livestock farmers and fishermen. We are extremely confident that the schemes introduced by the government towards the welfare of farmers and fishermen will contribute significantly to their growth in coming years. Zero Budget farming scheme is a great move wherein farmers can benefit through modern farming methods involving zero credit for agriculture and zero use of chemical fertilizers. These will double the farmers’ income in future. Setting up of 10,000 new farmer producer organisations will also empower the farmers. Launch of ‘Matsya Sampada Yojana’ and promoting aquaculture through easy credit access are all aimed towards converting India a hotbed of fish and aquatic produces.

Further, enhancing the participation of women in the development of the country is again a laudable step. With such landmark decisions, we are sure that the Government’s vision of building a US$ 5 trillion economy by 2024 is not a distant dream. We hope that these policies are implemented and brought into action at the earliest to create a better operating and enabling environment for start-ups.”

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