The government seems to have indicated that foreign capital is essential for New India
The retail sector is one of the most dynamic sectors of the Indian economy and in a sense, acts as one of the key performance indicators for the economy. It has also faced a fair bit of disruption—with the advent of organized retail and the now omnipresent e-commerce channels. All of this had impacted the neighbourhood kirana stores and local traders. Demonetization and goods services tax (GST) also had immediate repercussions on the traders’ community. Add to this the discerning and value-conscious Indian consumer, and the traders’ hands were full.
Some of the key asks by the traders in the run-up to the Union Budget 2020 were mostly around rationalisation of GST rates on various products, introduction of tax refund policy for foreign customers, relaxation for compliance to GST provisions by reducing the number and increased timelines for filing of tax returns, relaxation of merchant discount rates for fuelling digital payments, lowering personal tax rates to increase disposable income and increasing employment for developing the market.
In her maiden budget speech, the new finance minister seems to have laid out a somewhat attractive spread for traders in general with increased focus on spending and infrastructure. This will in turn, hopefully, spur consumption (a key demand in the run-up to Union Budget 2019-20), even as no major tax rate cuts for individuals have been announced. Also, waiver of merchant discount rates on both customers and traders for use of digital payment modes will further aid in improving retailing margins for the traders as well as enhancing ease for customers.
A significant budget announcements for traders is the fulfilment of the poll promise of extending the pension scheme announced in the interim budget to retail traders and shopkeepers. The new Pradhan Mantri Karam Yogi Maandhan scheme proposes to cover about three crore retail traders and small shopkeepers whose annual turnover is less than ₹1.5 crore with an easy Aadhaar linked self-declaration based enrolment process.
The government has already made it clear that GST rate cuts and rationalization beyond the two dominant slabs of 12% and 18% cannot be forthcoming very soon, but there was ample focus on simplification of GST administration in the budget. While a simplified single monthly return is being rolled out, the finance minister also announced a quarterly return for taxpayers with an annual turnover below ₹5 crore and a single tax ledger which would help to ease the compliance burden on traders.
While all of the above augur well for the small trader, the presence of organized retail and potential foreign direct investment (FDI) competitor continues in the same way. The government with its policy actions seems to indicate that both these channels must continue to exist and find a way of working together in a complementary fashion. It has indicated that foreign capital is essential for New India, whether through relaxation of sourcing norms for single-brand retail along with increase of FDI limits in various sectors and announcement of incentives to foreign manufacturers for mega manufacturing plants set-up in India.
The government has done its bit by accepting many of the demands of traders and has set the country on a growth path which is not possible without globalization and digital transition; hence it is now up to the offline trader community to rise to the challenges and offer an innovative retail experience that is far superior to what the screen of a smartphone or laptop can offer.