Budget 2022: Retail sector expects relief measures, reduction in tax burden

India's retail market is estimated to reach $1.5 trillion by 2030, from $0.8 trillion in 2020, manifesting the strong consumption power of over a billion Indian consumers, as they migrate upwards in the income pyramid. 

The retail sector has been amongst the worst hit, globally as well as in India, due to the uncertainties induced by the pandemic. Subdued sales, cost pressures have been driven by subdued consumer sentiment, lower social engagement as well as supply disruptions, lockdowns and mall closures. 

While a large majority of the sector has adopted different ways of customer outreach using home delivery, e-commerce, direct to customer models, growth and profitability have been a big challenge. 

The strategic relevance of the retail sector in employment, representation of MSME, traders, farmers, processors and the larger supply chain ecosystem, is often understated. 

The retail sector is the front end of several business segments, directly and indirectly having an important impact on employment, incomes, socio-economic stability and consumption power.

This budget would be expected to provide an uplift in consumer sentiment and support to the retail sector to tide over this period, as the sector stabilises back to pre-covid levels.  

On the consumer side, the budget could consider driving positive consumer confidence by allowing greater tax deductions towards spends incurred on healthcare. 

Additional relaxations could be provided on expenditure related to hospitalisation and critical care. With an eye to spur consumption, Budget 2022 should aim to put greater disposable income in the wallets of middle income and rural consumers, who are currently facing pressures of inflation and disruptions driven by the continuing pandemic.

On the retailer front, the industry is hopeful of acceleration in the implementation of the national retail trade policy, providing industry status to the sector. 

This would allow for multiple improvements related to regulatory burden, need for licenses and drive digitisation in the sector. The sector could also benefit from support in the form of carry forward of accumulated losses to allow for businesses to prioritise paying off liabilities related to unsold stock, salaries and rentals. 

Additionally, for businesses facing financial stress, any support in the form of preferential lending rates, an extended healing period for stressed companies. These could be some interventions that could help the sector tide through the year. 

Overall, the sector has high expectations that Budget 2022 could address some of the current issues faced and set a roadmap for formalisation and efficiency.

(The author is National Leader- Consumer Products & Retail, EY India.)

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