Necessary, a national policy for the retail trade


As the country battles a second wave of the coronavirus pandemic, the importance of retail supply chains is becoming clear in ensuring essential products are available across the country. Although localized or partial lockdown restrictions are once again crippling retail, the intensity of the second wave is most likely expected to abate within a month or so. The whole nation then hopes for a faster economic rebound than last year.

This is where the retail sector can play a crucial role in reviving the economy. But the Center must provide proper incentives and policy support to retailers to pull themselves together despite the headwinds blowing across India from Covid-19.

Exponential potential

In this context, a report by CII and Kearney sheds 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-related infrastructure, such as warehouses, could generate two to three million additional jobs by 2024.

Given the backward and forward linkages of trade, retail investment would trigger a cascading effect. This will thus create value for all these stakeholders through job creation, skills development, upgrading of the value chain, improved labor productivity and improved customer experience.

The report adds that if the Center implements a cohesive national retail policy that propels the growth of the retail industry, it could cumulatively create up to three million additional jobs by 2024. moreover, it will generate indirect employment opportunities in related sectors. Significantly, the retail sector is one of the largest employers of women in India, who make up around 25-30% of the total workforce. With this in mind, political reforms centered on women could inflate this figure to around 35% or more.

But the role of government is essential in implementing a comprehensive retail policy, acting as a catalyst to reinvigorate retail and trigger its next phase of growth. Institutional support is essential as 5-7 lakh retailers have been forced to close in recent years due to policy changes and challenges. A supportive policy environment would facilitate their return to business, generating three million additional job opportunities and leading to an additional 2% GDP growth, according to Kearney.

However, the CII National Retail Committee stresses that such a national retail policy must be rolled out immediately to bring all retail categories under one roof. In addition, this policy must address four critical areas: technology modernization and adoption, access to capital, ease of doing business (EoDB), and employee development.

In this context, the recommendations of the RAI (Retailers Association of India) should also be noted. Although the Association was largely satisfied with the Union’s FY22 budget, it expressed concern over the removal of import duty exemptions on certain products. Therefore, import-dependent retailers will be affected. In this situation, these companies will have to start sourcing from domestic suppliers to preserve their margins.

Policy support

On the other hand, the government’s plan to revise more than 400 tariff exemptions from October 1 could result in a revised tariff structure that would eliminate distortions. Once the ambiguities are resolved, traders importing goods will benefit.

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

The other key fact to remember is the Center’s intention to double the country’s economy from $2.5 trillion in 2020 to $5 trillion by 2025. While the vision remains the most ambitious, uncertainties linked to the pandemic have made this task doubly difficult. However, the retail industry can come across as a savior of some sort by facilitating this visionary goal, thanks to the sector’s extensive footprint.

Currently, the retail industry is $850 billion, employs 50 million people, and connects the nation’s ecosystem of 30 million SMEs (small and medium enterprises) to customers. For expansive economic visions to succeed on schedule, the retail sector must be co-opted to achieve these goals.

The supply chain links of a thriving retail sector can also ensure increased employment and entrepreneurial opportunities in related industries. For example, the manufacturing segment would have everything to gain from a dynamic retail trade. Given that the nation has at least 30 million job seekers every year, the retail sector could become a key player in providing higher paying employment opportunities to these aspirants.

Yet these projections will fall short in an overzealous regulatory environment. Instead, policy reforms should focus on facilitating sector growth through multiple means, including infrastructure development. Laws should also encourage investment, both domestic and foreign.

Meanwhile, the Covid-induced lockdowns have highlighted the importance of digital transactions in keeping the country’s trade and economy moving. To promote the same, the Center and the States should accelerate the construction of digital infrastructure across India. Unfortunately, by imposing undue taxes on digital transactions, current regulations do not incentivize offline merchants to move online. Such a discriminatory approach runs counter to the stated policy objective of promoting digital trade.

As a result, SMEs are forced to file separate tax records in different states while having cash flow locked in by standards that provide for withholding taxes. These anomalies need to be removed to create a level playing field for offline and online merchants.

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

The writer is founder and managing director – DEERIKA


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