India’s retail market is expected to become a $1.5 trillion market by 2030, from $0.793 trillion in 2020. The major drivers of this growth are socio-demographic and economic factors such as urbanization, rise of income growth etc. The Union budget is all set to be presented in the Parliament on 1st February 2022 by Nirmala Sitharaman, Union Finance Minister of India. With the ongoing pandemic and curbs imposed by the government, all the sectors are expecting a lot from this budget.
Union Budget 2022 Expectations
Nissan Joseph, CEO- Metro Brands Ltd
Footwear is as essential as apparel to any consumer. Footwear needs to be in the same category as apparel and should not be considered different. But currently, there is an apparent divide. For the budget 2022 we hope that the government will not consider the two as different categories. We strongly believe and recommend that the liabilities or taxes should be standardised for both the categories.
Additionally, we should also avoid inverted duty structure where the input tax is not comparable to the output tax.
Mayank Tiwari, Founder and CEO, Reshamandi
2022 marks potential for commendable growth and bigger-than-ever expansion with the right boost from the upcoming budget. On foresight, some remarkable reforms have to be made in enabling the three significant stakeholders that benefit from the three evolutionary stages of any product; suppliers of raw materials, manufacturers and the product sellers.
The proposal for a GST hike for the textile industry has been deferred, which I believe is welcome news. Thousands of small businesses can be adversely affected if the hike is not devised, taking into account all the stakeholders. At the seller level, tax burdens and rigid regulatory compliances should be remodelled, which can provide scope for growth and expansion. This will increase ease of doing business, and can largely contribute to the GDP. All in all, the future holds great promise for all of us; and I’m excited to see how the Finance Ministry enables these stakeholders from the textiles and apparel sector.
Kumar Rajagopalan, CEO, Retailers Association of India (RAI)
More money in the hands of the poor and the salaried: two years of Corona pandemic has impacted many in the poorer section of the population. Many were without jobs thanks to reverse migration and lock downs. Any scheme that helps increase the spending power of the poor would be welcome. Similarly, the salaried class of the population also needs to get more money in their hands to help them consume with confidence. Rising inflation is a worry, and this can be faced better only with more money in the hands of the consuming class.
Better infrastructure spending: All transport infrastructure work helps create new jobs as well help create better logistical connectivity for movement of goods and people. This results in saving time , reducing supply chain wastage and better movement of workforce. Similarly, any expenditure on new sources of energy helps retail access electricity at better prices.
Better direction for implementation of GST: Any increase in GST on clothing, food and housing creates a direct impact on consumption. A direction for a more predictable GST regime would be welcome. Similarly, many clauses around carry forward and refund of GST needs clarification.
National trade policy: Directional support to creation of a nation level policy for retail and internal trade would help.
MSME support for retail: While the retail sector recently got included in Priority lending guidelines under MSME, it is important for the sector to get all support that MSME policies accord as more than 90% of retail can be classified as MSME.
ECLGS support for retail: ECLGS for finance in retail needs to be announced as most of the lockdowns impact high contact sectors like restaurants, shops , salons etc.
Support to retail with policy around digitisation: Retailers need to get themselves digitized faster and need to get e-commerce ready. Financial support for digitisation can help better boost the sector. Also a directional focus to enabling retailers through Open Network for Digital Commerce ( ONDC) would give a big boost to the sector.
The ongoing pandemic has proved a catalyst for the digitization drive, with service providers stepping in to bridge the gap between the rural and urban landscapes. The Government is keen on a Digital India, and we expect the Union Budget 2023 to depict a greater and more sustained push towards the same, especially with regards to digital payments and retail technology. We expect the Union Budget to bring in more reforms for domestic retail manufacturers and brands as this would drive the Make in India and Atma Nirbhar Bharat initiatives while offering support and strengthening the local retail landscape. We are also keen on more clarity around the e-commerce guidelines and hope the Government promotes the sector in the upcoming budget. Further, we look forward to a well-calibrated reduction in income tax slabs as this will help taxpayers save money and, the money thus saved can fuel further consumption and economic growth, helping revive the economy as a whole. We also hope that the upcoming Budget focuses on growth and promotes spending by dropping the already deferred GST on textiles and garments.
Farman Beig, Co-founder & CEO, Wat-a-Burger
It takes multiple licenses to establish a food & beverage business in India. We expect the government to address this in the upcoming budget. Additionally, the sector requires reintroduction of the inputs tax credit. Also, considering the sector has been struggling due to the pandemic havoc, it is necessary to provide it with a relief package and special fund allocation for speedy recovery.
Narendra Pasuparthy, Chief Farmer, CEO & Co-founder, Nandu’s
I’m mainly looking at two things from the upcoming budget. Firstly, better incentives for the food processing industries that are trying to organize the supply chain and improve the retail experience of the consumer. This essentially means subsidies on equipment, cold-chain infrastructure and new product development interest subsidies or grants.
Secondly, D2C which is a thriving category today, involves end-to-end transit from the manufacturer upto the consumer household, which in turn means burning of fossil fuel. Therefore, better subsidies on electric vehicles, and incentivising D2C companies to adopt green transportation for commercial delivery will not only improve the industry but also encourage sustainability in the long run.
Prithviraj Kothari, Managing Director of RiddiSiddhi Bullions Limited (RSBL)
In a bid to make the Sovereign gold bond scheme more attractive, it is expected that the upcoming budget will make the interest received on Sovereign gold bonds, tax free. It is suggested that capital gains tax on sale of old gold should be withdrawn. This will help in channelizing more old gold into the organised trade; jewellery shops and gold refineries, enabling the govt. to earn 3% GST revenue on gold purchased / sale as well.
Shobhit Singh, Director, Stone Sapphire India Private Limited
Every year the budget announcement is awaited majorly for relief measures either Tax relief or subsidies or encouraging some tariff barriers. I come from a very big community with a very small say in every strategic political-economic decision called the SME sector, although it’s considered being the backbone of the economy but the least policies are made considering them. We SMEs are the middle class of the business society who contribute maximum to the society but are always left behind while considering their demands. We all are coming out of covid and are cash strapped so need a thoughtful policy from the government in developing an ecosystem for the generation of finance or funding for SMEs in the manufacturing, trading and service sector. Govt. is promoting and incubating new age economy startups and even so-called angel investors are ready to invest in these economies due to high Operating margins but if we want wealth and employment generation and have the desire to create a large manufacturing base like China we have to invest in old age economy which deals in manufacturing and trading of commodities where you require large scale establishments and that can only be possible with investment.
Sachin Jain, Managing Director, De Beers India
The Gems and Jewellery sector contributes to 7% of India’s GDP and forms around 12% of our export basket and plays a critical role in terms of employment generation. Over the past year the industry bounced back and performed well due to multiple positive steps taken by the government including reducing the import duty on gold and silver as well as ensuring there were no drastic increases in personal taxes. Beginning 2021, we also noticed that consumers moved towards purchases that were meaningful and brought value to their lives where jewellery played an important role. We look forward to the forthcoming budget in view that the gems and jewellery sector plays a pivotal role in the growth of the economy.
Parag Kulkarni, Managing Director, A. O. Smith India
The consumer durables industry has faced challenges with raw material costs for more than a year, and we are optimistic that the Union Budget will help reduce cost pressures for manufacturers and improve affordability for consumers. The budget may also look at reducing taxes on eco-friendly and energy-efficient products, which could help drive demand and increase consumer adoption of sustainable products.
Water purifiers and water heaters have become essential household items. We expect the budget to help rationalize tax rates on these consumer durable items, increasing the popularity and need for these products in India. We hope that the residential real estate market will also be positively impacted by the budget. Real estate is the second largest market after agriculture, generating large scale employment and supporting multiple allied industries. We are hopeful that the upcoming Union Budget will help usher in a balanced combination of reforms and regulations, which will contribute positively to India’s growth.
Expectations of the e-commerce industry
The Indian e-commerce market is expected to cross the $350 million mark by 2030, growing at a CAGR of 23%. The growth driver of the sector is the foray of D2C (Direct to Consumer) brands in every category, government taking measures on digitization, new modes of online payment and the development of local logistics support.
Here’re the expectations of the industry:
Dinesh Agarwal, Founder & CEO, IndiaMART InterMESH Limited
A rise in COVID-19 cases caused by the new Omicron variant may threaten India’s financial recovery yet again. In such a circumstance, the administration would face a challenge in reigniting economic growth. But the MSME sector looks to the future with much hope and positivity. The sector expects the Budget to 1) simplify the tax regime, 2) enhance investments in crucial segments, and 3) provide further incentives to start-up companies and the MSME sector.
The government has given a call for creating a self-reliant India. And IndiaMART, like many other Indian businesses, is a proud contributor to this initiative. A self-reliant India would seek greater wealth creation and wealth maximization in the hands of Resident Indians. One of the ways to achieve this goal would be to limit Foreign Direct Investment (FDI) in tech and internet businesses to 75%, instead of 100% now, unless the company is a wholly-owned subsidiary of a foreign company. This will ensure at least 25% of the wealth is created in India and remains in Indian hands. We request the Government to address this issue through the upcoming Budget.
The smallest businesses and largest corporations of India must work together to fuel economic recovery and prevent any further depression of great magnitude. While we are optimistic about the coming future, we firmly believe this is only achievable via improved and smooth public systems. The government announced in the previous budget session that it would extend social security benefits to millions of contractual and casual workers across India, by creating ESI infra for underprivileged people which provides health insurance and other benefits. In order to complement this initiative, health insurance for workers should be included as an ESI contribution, which is something we are looking forward to in this Budget as this would help private hospitals to complement the Government initiative.
Rajiv Kumar Aggarwal, Founder & CEO, StoreHippo (E-commerce)
The pandemic proved beyond doubt that digital commerce would lead the way to growth, job opportunities and booming startup culture in India. With more and more SMEs as well as reputed brands taking the ecommerce route to survive amidst the ravages of the pandemic, we expect the Government to make it easier for businesses to go online. The government should further relax the regulatory compliances and paperwork needed to start an online store or online marketplace. The government should also increase the threshold for qualifying as an SME. This would help startups and small firms channelise their revenue for further growth which would eventually help the economy. Also, the new ecommerce verticals like Agritech, Edutech, HEalthtech, Fintech etc. should get government support and push as these have the potential to change the Indian economy for the better.
Overall, the budget should make it easier for businesses struggling with the impact of COVID to bounce back with help from the government in the form of relaxed regulations, compliances, easy loans/funding opportunities, tax rebates etc. Aside from that, there should be some relief for businesses that have experienced considerable losses as a result of the shutdown and subsequent events.”
Dilli Babu Nandarapu, Founder & CEO, ShopConnect
It is critical to incentivize offline SMEs to adopt and strengthen digital solutions to ensure better business prospects and speedy recovery of the overall economy. Moreover, digital infrastructure support will be important especially for MSME retailers since the future is getting more and more digitized, personalized, and connected. If we equip them from business disruption, it will contribute more to the Indian economy. In addition, accelerating ONDC rollout will facilitate e-commerce platform providers to offer more features and easier customer onboarding covering rural areas and non-metro cities as well. Lastly, promoting sales process outsourcing (SPO) as it will provide more employment opportunities at the same time global brands can leverage India’s advantage. I believe the focus should be more towards strengthening infrastructure, end to end digitization capabilities to support emerging startups in this space. There should also be some respite from a mandatory compliance for the D2C Brands as it will help to establish and scale offline and online businesses.
Dr. Himanshu Gandhi, CEO & Co-founder, Mother Sparsh
During the previous budget, the government in its bid to benefit the D2C sector took a number of steps, such as extension of tax holiday for startups, extension of eligibility period of claiming capital gains and pushing the paid-up capital of small firms from Rs 50 lakh to Rs 2.50 crore. We expect the Finance Minister to extend the purview of Start-up India Seed Fund Scheme to promote startups that achieved remarkable feats during the pandemic. In this budget, the government should provide financial assistance to growth-oriented startups with proven capabilities to enhance their R&D, product trials, prototype development and proof of concept.
Kapil Bhatia, Founder & CEO, UNIREC
The fashion startups are expecting the government to improve the disposable income of the consumers as well as the reduction in GST rates of readymade clothings. Current GST rates of readymade clothes that cost above INR 1000 fall under the category of 12 percent and the government should bring it down to 5 percent. The government, with its budget, should focus on improving the infrastructure and remove any kind of inconveniences in the supply chain for a smoother functioning of the fashion retail industry. In addition to tax rate reduction, easier compliance and simplification of taxes are two of the major expectations of the functional fashion startups in the market. Moreover, the prime motive of the government should be to empower both skilled and unskilled employees.
Prashant Lohia, CEO and Founder, Ginesys
The consumer durables industry has faced challenges with raw material costs for more than a year, and we are optimistic that the Union Budget will help reduce cost pressures for manufacturers and improve affordability for consumers. The budget may also look at reducing taxes on eco-friendly and energy-efficient products, which could help drive demand and increase consumer adoption of sustainable products.
Sahil Dharia, Founder & CEO, Soothe Healthcare
Simplification of regulations especially with respect to unlocking Land, Labour & Capital use will create an overall ‘encouraging’ environment for entrepreneurs to take risk and business to thrive given the large domestic opportunity.
Make in India is the pointed edge of that weapon that gives jobs, builds capacity, reduces our fiscal deficit and maybe even helps build technological prowess in time. These are all essential ingredients if India wants to project as a global power.
Flat GST Tax Rate: A major simplification drive for instance, a flat GST tax rate will go a long way in creating an impetus for a cyclical bull run in the industry. Moreover, there are anomalies in GST, for example, in the feminine hygiene sector with GST on sanitary pads being ‘zero’ the input tax credit can’t be availed by industry, making the transaction tax inefficient thereby reducing the growth CAGR.
Though manufacturing-based companies in India appreciate no Zero GST on sanitary pads, it is still significantly affected by high raw material and manufacturing costs. Hence, we look for some relaxation in this area.
Government support towards Non-Tech Companies to push Make in India Agenda: To promote Make in India, the government should encourage more investment in the non-Tech companies. Right now, capital is increasingly being deployed towards Tech companies majorly Fintech. Government investments via e.g SIDBI serves the purpose of crowding capital into a sector which is already getting more than sufficient attention.
Indian entrepreneurs need this support to shift the materials supply chain from China and sell products not only via the internet economy but also offline for easy access to a large population residing in the hinterland of Bharat.
Mortgage Free Loans to Small Entrepreneurs: Lastly, banks need to reduce formalities and provide small entrepreneurs with loans without collateral. The CGTMSE for instance can be increased from the current max 1 cr to 5 cr and make any MSME business eligible for it. An environment where small entrepreneurs can get loans without having to mortgage any personal asset will drive growth of new businesses as well as expansion of existing businesses and unlock the potential of our robust trading & manufacturing sector.
If we get just a couple of things right, then the momentum we can build in the next decade will be comparable to the ‘great leap forward’ of China in the 90’s and the Indian economy will still grow at 5-7% in the coming decade. This can truly solidify India’s position in the global pecking order.
Kushang, Co-founder & CEO of SupplyNote
The food and beverage industry has incurred heavy losses due to the pandemic, which makes it essential for us to look up to the Union Budget 2022-23 for relief. In order to accelerate the recovery of the sector, this budget should enable interest free loans, greater subsidies, and a reduction in tax structure. Additionally, since most of the F&B businesses fall under Micro and SMB categories they should be offered extended moratorium. Considering the current situation, business losses should be allowed to be carried forward from the existing 8 years to 12 years.
