Catalyst

From GST to G.I.S.T

Harish Bhat | Updated on March 10, 2018 Published on September 08, 2016

All-encompassing The Goods and Services Tax will replace a patchwork of central and state levies.

ct09_Harish_FICCI

Four reform imperatives to unleash the power of Consumer India



India is the most exciting and dynamic consumer economy in the world today. It is distinctive, diverse, and growing faster than any other country. We have the world’s second largest population, and a middle class that exceeds 150 million people. More interestingly, our country has by far the largest population of young consumers in the world. With 440 million millennials, and 390 million GenZ teenagers and children, India’s consumer story will only get more compelling with every passing year.

Fuelling the dynamism of our consumer economy are also the progressive outlook and confident reforms which are being steered by the Union Government. No wonder Indian consumer confidence is the highest in the world today. As per the most recent Nielsen global survey, India’s consumer confidence index stands at 134, ahead of all other nations. If there is a jewel in the global consumer crown today, it is India.

Confident confident reforms

For infusing such confidence, I must give full credit to the Union Government for the many reforms it has pushed forward. We have witnessed, over the past year, GST, FDI reforms in e-commerce, policies to enhance the ease of doing business, and the novel idea of ‘Make in India’. While all these progressive reforms provide a fillip to growth, the Government also has, in partnership with the Reserve Bank of India, evolved clear inflation targets to be met. Lower inflation also feeds into higher consumer confidence.

The path to GST has been long, but we are finally getting there. With the recent passage of the GST Bill in Parliament, we now await the dawn of a GST-enabled India. GST is perhaps the most important tax reform we have seen in modern India. It will have wide-ranging impact, well beyond the domain of taxes, because it will herald a new way of doing business, lead to far more efficient and modern supply chains, and, in the long run, enhance our country’s cost competitiveness. For the common man, it will translate into greater choice, enhanced affordability, better quality, faster delivery and more job opportunities arising from investments by corporates. With such a broad impact on the consumer economy, GST also stands for a ‘great and significant transformation’.

GST to G.I.S.T.

Let me now turn to four key reforms related imperatives which I think will be critical to unleashing the full power of our consumer economy. These four imperatives are GST implementation, infrastructure development, simplicity of doing business and trends driving consumer behaviour, which we should support and leverage. In combination, let me call these four factors by their initials, GIST.

GST implementation

We are confident that GST will soon cross all its legislative milestones. But that’s only a start. The real key to success of this wide-ranging reform will be in its detail and implementation. Optimal GST levels for various categories, the formulation of rules and their execution across the country will be a litmus test for all stakeholders, particularly given the size, diversity and enormous retail base of India. We must bear in mind that this uniform tax system must, in one fell swoop, encompass a wide spectrum – large corporates to small industries, organised retail chains to the neighbourood kirana stores. While the GST rate needs to be revenue-neutral, it has to take into account the contingencies of each industry, and has to avoid fuelling inflation. Transitional issues need to be addressed in a fair and inclusive manner, so that the pain of the short term does not drown out the nirvana of the long-term.

Infrastructure development

Despite a growth-conducive environment, why are FMCG, retail and e-commerce sectors not able to realise their full potential today? One clear reason is lack of adequate infrastructure, which poses a major challenge, as this increases supply chain costs and the pain of doing business. For instance, lack of adequate warehousing facilities and poor road infrastructure are critical impediments to the growth of retailing in India. Similarly, at the crux of the digital revolution is our ability not just to stay connected online, but to do so at a fast speed, which facilitates digital transaction and engagement.

India ranks pretty poorly on internet speed, and many parts of rural India are yet receive broadband connectivity. While there are useful initiatives in place, such as the plan to connect more than two lakh gram panchayats through broadband infrastructure, the speed of these initiatives should match the pace of the digital economy.

Public-private partnerships can be explored to establish these digital highways of the country. Finally, some new infrastructure requirements have arisen from the growth of e-commerce: for instance, logistics and delivery infrastructure. These require focus and investments too. What is the roadmap to world-class infrastructure for consumer India ?

Ease of doing business

A progressive, “simple and easy” national-level retail policy will do wonders for retailing in India, particularly for physical retailing. As retailing is regulated by different operating and licensing norms in every state, and since as many as 51 clearances are required to set up a retail business, the time required to start operations can extend to anywhere between six months and a year.

The retail sector will also benefit greatly from simplification of these norms. It will also benefit from a consumer-led approach, which brings both online and offline retail under one comprehensive regulatory umbrella, because these are only two channels that serve the same consumer. It is heartening to see that some states have announced progressive policies for the retailing sector recently, and we await similar views from all other States too. The Model Shops and Establishments Act, with its offering of 24x7 convenience to Indian consumers, is a good step in this direction.

Trends

Big consumer trends are sweeping India today. Health and wellness is one such trend. All of us want to be healthy, look fit and feel young. Digital is another such big trend. Many more Indians want to do everything digitally – shopping on e-commerce sites, paying using digital mobile wallets, connecting over Whatsapp or Facebook. Because these trends are so new, becoming so large, and moving so fast, we need all stakeholders to work together to actively promote these trends, and to develop clarity on critical areas.

For instance, on health and wellness, what should the optimal norms be, for fortification, or organic food, or recalibrating recommended daily allowances of specific nutrients for Indians? On digital, there is need for an overarching and enforceable policy for consumer data protection and privacy, given that so many corporates are collecting so much consumer data today.

The draft Cyber Secruity Policy and draft Privacy Bill, tabled in Parliament, are a good starting point, but this requires quick approval and implementation. Equally importantly, industry and the government have to come together to promote these big trends, because better focus on health and wellness, and stronger reach of digital, will benefit the common man.

Jaago Re

These four imperatives – GIST – can help unleash the power of our consumer economy. But perhaps the most important point is for all of us in the corporate world to keep the consumer and the community at the centre of our universe. Consumer protection, authenticity of products, earning the consumer’s trust, and indeed the trust of the community should be the centrepiece of our efforts. A brand which I have been associated with, Tata Tea, has famously urged people to wake up, through its clarion call of “ Jaago Re”. I think corporates too have an important duty to wake up to this very same call. Because all of us have a role to play in driving this awakening, and in fulfilling the aspirations of our consumers and community.

This is the edited text of a speech the writer delivered at the FICCI Annual Conference on FMCG, Retail and E-Commerce, Massmerize 2016, held in New Delhi on September 1, 2016.

HARISH BHAT MEMBER, GROUP EXECUTIVE COUNCIL, TATA SONS

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Published on September 08, 2016
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