A step in the right direction
The eyes of the entire nation were on the Finance Minister as she delivered the Budget 2021, a budget that had a lot riding on it considering all that happened to the country’s economy in the last one year. While the budget speech was economic in its length compared to last year, it’s content was potent in terms of what it delivered.
The retail industry was crippled during the lockdown. As the economy opens up, it is now slowly getting back on its knees. The Budget has several initiatives which touch all segments of the society – women, farmers, entrepreneurs, rural and urban consumers to help sustain the momentum of recovery and growth.
The positives for retail are the overall thrust on ease of doing business & compliance and infrastructure development.
There are a host of substantial announcements that will enhance logistics capabilities of retailers, which are welcome as retail is heavily dependent on easy movement of goods and people.
The on-going pandemic has put a substantial financial burden on the government. And it was feared that additional taxes may be levied to help the government ease the economic burden. The good news here is that while there is no significant change in income tax slabs for the salaried, no additional tax has been imposed either. Furthermore, the changes to how appeals and assessments are made will give a breath of relief from harassment for businesses. Increase in Tax Audit Limit to Rs.10 crores from Rs.5 crores for those having less than 5% cash transactions will not only help small retailers but will also promote digital transactions.
In addition to infrastructure, a major emphasis was put on healthcare, public spending on rural segments, public distribution and transport. All these are good initiatives as, in the medium term, they are likely to boost the country’s growth potential. The big push on spending is likely to provide a shot in the arm to key growth drivers. And though it is not evident at the outset, this budget does have the potential to trigger consumption to some extent, at the ‘bottom of the pyramid’.
The apprenticeship program has been a great source of skilled manpower to the industry and a big source of employment to the country’s youth. The allocation of additional Rs 3,000 crore towards this program is a good move as the retail industry, which is already greatly benefited by the National Apprenticeship Promotion Scheme (NAPS), will further benefit from the fresh infusion of skilled talent.
The Government has proposed to rewrite the definition of ‘Small Companies’ under Companies Act 2013. Now, companies with capital less than 2 crore and turnover less than 20 crore will come under the ambit of small companies. This will greatly help small retailers by easing their procedural and compliance burden. RAI believes that the Government will soon amend the MSME Act to allow retailers to register as MSME so that retailers too can avail of all the benefits available to other MSME businesses. The extension of tax holiday by one more year is welcome news for retail startups and innovators.
On the import duty front, the exemptions on some products have been withdrawn. This will impact retail businesses that are dependent on import. Such businesses may have to relook their sourcing policy and look at sourcing from within the country.
Women are a large part of the retail workforce. The honourable Finance Minister’s thrust on ease of doing business by allowing women to work in all categories without restrictions is a very welcome move.
Finally, the proposal to review more than 400 exemptions to customs duty w.e.f October 1 will lead to a revised customs duty structure that is free of any distortion. It will remove ambiguity benefitting retailers who import goods.
Overall, it is a growth-oriented, well-balanced and progressive budget. One that is popular without being populist. It is a right step toward Atma Nirbhar Bharat and seeks to strengthen the economy.
The author of the article is CEO, Retailers Association of India (RAI)