Budget 2019 wishlist: Here are the key challenges for retail sector

Key challenges

• Multiplicity of laws and regulations governing the sector
• Restrictive conditions under the foreign direct investment (FDI) policy for single-brand retail trading
• Lack of clarity and understanding of regulations/guidelines governing online retail trading, leading to ambiguities and hurdles for the e-commerce sector
• Inadequate physical and digital infrastructure
• Lack of industry status for retail

 

Industry ask

• Need for harmonisation of retail policies and regulations: There are various laws and regulations that affect the retail sector. In addition to this, several states such as Andhra Pradesh, Maharashtra, Haryana and Karnataka have released their retail policies and the central government is planning to come up with a national retail policy.  There is thus a need to align and harmonise the multiple policies and regulations to eliminate disparities in interpretation and implementation at all levels of the government. This will make it easier for businesses to comply with regulations across the country and facilitate ease of doing business. 
• Revisiting FDI in retail policy: The positive stance of the government towards FDI in food retail should be replicated in non-food retail category. This would lead to greater investment in front-end retail in India and create positive multiplier effects on the backend supply chain and support infrastructure and encourage 'Make in India'. While the government has taken proactive measures to allow 100% FDI in single-brand retail trading, there are several conditions under the policy that need to be revisited to enable further investment in the sector. Given India's low export performance, the policy can be an important tool to encourage exports by liberalising the conditions on sourcing.

• Provide a boost to physical and digital infrastructure for online and offline retail: Logistics and the supporting infrastructure are crucial for the retail industry. Simplification in the process of approval of new warehouses and fulfillment centres and enabling investment in physical infrastructure, transportation, and cold storage will greatly benefit the sector. A boost to digital infrastructure through incentives for the creation of data centres and strengthening the reach and quality of telecom networks will enable wider access to the retail market.
• Need of industry status for retailers: Granting industry status to retailers would provide better access to funding. Also, under priority sector lending norms, lending can be extended to small micro, small and medium enterprise (MSME) retailers, which will give a boost to small traders who are under high pressure with growing competition from organised retail and ecommerce.

PwC POINT OF VIEW

“The last one year has been very dynamic in terms of deliberations on new policies and regulations impacting both online and offline retail. While the intent has been to provide a regulatory road map for the industry, it is critical that such policies act as an enabler to the sector's growth and further ease of doing business. For this it is crucial that various policies impacting retail are aligned and a conducive regulatory environment is created where both offline and online retail channels co-exist in harmony. The time is also ripe to re-look at the foreign investment policy on the sector as a whole, riding high on Make in India and export promotion, on the same lines as food retail.”

Akash Gupt, partner and leader regulatory services, PwC India

INDUSTRY VOICE

“There has been some stress to consumption over the last six months and there have been liquidity issues with businesses as well as lay consumers. I would expect the Budget to bring some relief to these people through tax measures and policy initiatives to boost employment. I also expect the Budget to address rural distress.The rains have been patchy so far and the rural sector will need help to tide over the season. I am looking forward to the policy measures announced for the rural sector in the Budget to help them earn more. Because only when they earn more, will they be in a position to spend.”

Lalit Agarwal, CMD, V-Mart Retail