Opinion

Needed, a national policy for the retail sector

Akash Anand | Updated on July 06, 2021

A holistic retail policy can facilitate ease of doing business besides helping pandemic-hit retailers get back on their feet, driving faster economic recovery

As the nation battles a second wave of the coronavirus pandemic, the significance of retail supply chains becomes clear in ensuring essentials are available across the entire country. Though localised or partial lockdown restrictions are once more crippling the retail trade, the second wave’s intensity should most likely abate within a month or so. The entire nation will then be hoping for a quicker economic rebound compared to last year.

Here is where the retail sector can play a crucial role in getting the economy humming again. But the Centre needs to provide proper incentives and policy support for retailers to get their act together despite the stiff headwinds blowing pan-India because of Covid-19.

Exponential potential

In this context, a report by CII and Kearney sheds some light on how a comprehensive National Retail Policy could facilitate the creation of three million jobs by 2024. It states that investing ₹6,500 crore in retail-linked infrastructure, such as cold storage facilities and warehouses, could generate an additional two to three lakh jobs by 2024.

Given the trade’s upstream and downstream linkages, investments in retail would trigger a cascading effect. This, thereby, will create value for all these stakeholders via employment generation, upskilling, value chain modernisation, enhanced labour productivity and improved customer experiences.

The report adds that if the Centre implements a cohesive National Retail Policy that propels retail industry growth, it could cumulatively create up to three million additional jobs by 2024. Moreover, it will generate indirect employment opportunities in allied sectors. Significantly, the retail industry is one of India’s largest employers of women, who comprise around 25-30 per cent of the total workforce. Keeping this in mind, women-centric policy reforms could inflate this figure to around 35 per cent or higher.

But the government’s role is pivotal in implementing a comprehensive retail policy, acting as a catalyst for reinvigorating the retail trade and unleashing its next growth phase. Institutional support is critical because 5-7 lakh retailers were forced to down shutters in recent years due to policy-related changes and challenges. An enabling policy environment would facilitate their return to business, generating three million extra employment opportunities and leading to incremental GDP growth of 2 per cent, as per Kearney.

However, the CII National Committee on Retail stresses that such a National Retail Policy must be rolled out immediately to bring all categories of retail under a single canopy. Furthermore, this policy must address four pivotal areas — modernisation and technology adoption, access to capital, ease of doing business (EoDB) and employee up-skilling.

In this context, one also needs to note the recommendations of RAI (Retailers Association of India). While the Association was largely pleased with the FY22 Union Budget, it has expressed concern over the withdrawal of import duty exemptions on some products. Therefore, retail traders depending on imports will be affected. In this situation, such businesses will have to begin sourcing from domestic suppliers to safeguard their margins.

Policy support

On the other hand, the government’s plan for reviewing 400-plus customs duty exemptions effective from October 1 could result in a revised duty structure that eliminates distortions. Once the ambiguities are removed, traders importing goods will benefit.

Another welcome announcement is the government’s thrust on EoDB, which will permit women to work in all categories without restrictions. By institutionalising such progressive measures, gender diversity within the retail segment will be increased.

The other vital fact to remember is the Centre’s intent of doubling the country’s economy from $2.5 trillion in 2020 to $5 trillion by 2025. Whereas the vision remains most ambitious, pandemic-related uncertainties have made this task doubly difficult. However, the retail industry can emerge as a saviour of sorts in facilitating this visionary objective, thanks to the sector’s widespread footprint.

Presently, the retail industry stands at $850 billion, employing 50 million and connecting the nation’s ecosystem of 30 million SMBs (small and medium businesses) to customers. For expansive economic visions to succeed as per timelines, the retail sector must be co-opted in achieving these targets.

A thriving retail sector’s supply chain linkages can ensure an uptick in avenues for employment and entrepreneurship in allied industries too. For example, the manufacturing segment would stand to gain immensely from vibrant retail trade. Since the nation is estimated to have at least 30 million jobseekers every year, the retail sector could emerge as a key player in providing more gainful employment opportunities for these aspirants.

Yet, these projections will fall short in an overzealous regulatory environment. Instead, policy reforms must focus on facilitating sectoral growth via multiple means, including infrastructure development. The laws should also encourage investments, domestic and foreign.

Meanwhile, the Covid-induced lockdowns have highlighted the importance of digital transactions in keeping the nation’s trade and economy moving. To promote the same, the Centre and States should accelerate the building of digital infrastructure across India. Unfortunately, by imposing undue taxes on digital transactions, the current regulations don’t incentivise offline traders to shift online. Such a discriminatory approach runs contrary to the stated policy objective of promoting digital trade.

Consequently, SMBs are made to file separate tax registrations in different States while having cash flows blocked by norms that stipulate withholding taxes. Such anomalies should be removed to create a level-playing field for offline and online traders.

The ongoing pandemic offers an ideal opportunity to implement rational tax regulations that support faster economic recovery. For that to happen, the time to bite the bullet is now.

The writer is Founder and Managing Director – DEERIKA

Published on July 06, 2021

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