Retail leaders across categories assess the impact of the key announcements in the Union Budget 2024-25, analysing how the newly introduced measures and policy changes will influence their operations and growth prospects
Bengaluru: The Union Budget 2024-25, revealed on Tuesday by Finance Minister of India, Nirmala Sitaraman, who unveiled a range of measures aimed at tackling key industry concerns and stimulating growth, has generated a buzz among retailers.
While sector-specific measures are seen as sorely missing, the leaders appreciate the government’s focus on removing challenges through a slew of measures from the reduction in import duties on precious metals to the introduction of new credit schemes and export hubs.
“Whilst most of these measures are for all industries, they will likely benefit the textile and apparel industry equally, if not more, since it is more labour-oriented. The import relaxation in some of the important raw materials, trims and accessories required for garment manufactures will also help the garment manufacturers to be more competitive, especially in the Export markets,” said Rahul Mehta, chief mentor, Clothing Manufacturers Association of India (CMAI), who is the spokesperson for the body.
IndiaRetailing spoke to leaders across the retail industry to gather their reactions to various announcements under Union Budget 2024…
Skilling and Employment
The budget has committed to investing in education, skills development, and employment, particularly focusing on women, with schemes for employment-linked incentives.
Amit Khatri, co-founder of the smart wearable brand Noise said, “By linking job creation in manufacturing to first-time workers and offering Employees’ Provident Fund Organisation (EPFO) incentives, the government is paving the way for a robust manufacturing ecosystem, creating four crore jobs over the next five years.”
“It is certainly a commendable initiative to boost local manufacturing. Additionally, offering internship opportunities in the top 500 companies to one crore youth is a strategic move that will equip our young population with the skills and experience necessary to thrive in a competitive global economy,” he added.
Arjun Ranga, managing director of the incense brand Cycle Pure Agarbathi highlighted the Finance Minister’s promise to build more working women hostels and establish creches.
“Organising women-specific skilling programs and promoting market access for women self-help group enterprises is a welcome move, the formalisation and concretisation of this into standard policy frameworks and employer incentives will determine its efficacy in bridging the gender gap in India’s workforce,” said Ranga.
Rural Development and Agriculture
The government has pledged to conduct an extensive review of the agricultural research system, aiming to boost productivity and develop climate-resilient crop varieties. This initiative will include challenge-based funding opportunities, extending support to the private sector as well.
Sanjay Kumar, managing director of the food service company Rassense Pvt. Ltd. said, “The emphasis on FPO-based cooperatives is a strategic move that will empower farmers, promote collective growth, and safeguard the sector’s long-term stability.”
“It will not only address farmers’ immediate needs but also establish the foundation for long-term agricultural profitability and resilience,” said Kumar.
Also, a National Cooperation Policy will be introduced to facilitate systematic, orderly, and comprehensive development of the cooperative sector which aims to fast-track the growth of the rural economy and create extensive employment opportunities.
“The allocation of 2.66 lakh crore for rural development and rural infrastructure will positively impact the lives of millions of rural population,” said Abhishek Sinha co-founder of GoodDot, a plant-based meat and vegan food manufacturer.
“This will also help in arresting the growth rate of rural-to-urban migration. Rs 2 lakh crore has been allocated to employ over 4.1 crore youth over the next five years. This is a much-needed step for India to gain from its demographic dividend,” added Sinha.
Startup Ecosystem
This budget turned out to be a boon for start-ups due to the elimination of angel tax for all types of investors. According to the minister, this move is expected to strengthen the Indian start-up ecosystem, boost the entrepreneurial spirit and support innovation.
“The removal of the angel tax is a huge relief and will make it easier for startups to get early-stage investments. It is a positive step forward, and it will significantly contribute to the overall economic growth of the country,” said Pallav Bihani, founder of the health and fitness company Boldfit.
Echoing Bihani, Falguni Nayar, founder of Nykaa said that, “The abolition of the angel tax provides a significant boost for startups, propelling innovation and investment. With retail tech being a key area in startups, this move is poised to drive growth in the digital economy.”
Support for MSMEs and Manufacturing
Experts suggest that the new credit guarantee scheme, designed to facilitate term loans for purchasing machinery and equipment, is highly anticipated and essential for retailers, especially micro, small and medium enterprises (MSMEs).
According to Sunil Jhunjhunwala, co-founder of the sportswear brand TechnoSport, “The credit guarantee scheme and term loans for machinery acquisitions are noteworthy initiatives that will enhance access to capital for MSME and will help to enhance productivity and competitiveness.”
The term loan, which previously demanded collateral or third-party guarantees, will now allow for the aggregation of credit risks and offer guarantee coverage of up to Rs 100 crore, pointed out Suresh Babu, chief executive officer of the mattress brand Restolex.
“This Initiative is sure to assist MSMEs in upscaling their operations and enhancing technology adoption with low levels of exposure to risk,” Babu added.
Moreover, the promise to establish export hubs to help MSMEs and traditional artisans access global markets is a visionary move, said retailers.
“These hubs will empower our MSMEs and artisans by providing them with a smooth regulatory and logistical framework, enabling them to tap into international markets with ease,” said Shammi Agarwal, director of Pansari Group, a homegrown FMCG company.
Direct and Indirect Taxes
The reduction in import duties on gold, silver, and platinum, a long-standing demand from jewellery retailers, has been addressed in the Union Budget 2024, providing much-needed relief.
“This move is expected to boost gold demand in the country and create jobs for artisans,” said MP Ahammed, chairman of Malabar Gold & Diamonds.
“High import duty often leads to increased smuggling of gold through illegal routes, which hampers the growth of the organised retail gold trade and results in revenue losses for the government. It is expected that the duty reduction will drastically cut down gold smuggling, thereby curbing illegal trade and enhancing tax revenues,” added Ahammed.
According to Amit Pratihari, managing director of the diamond brand De Beers Forevermark, “The proposed reduction in customs duties will enhance sales by making these precious metals more affordable.”
He also called attention to the implementation of safe harbour rates for the diamond-cutting industry, specifically for foreign mining companies selling rough diamonds in India, which will stimulate growth, boost consumer spending and increase global competitiveness.
The minister announced changes to tax collected at source and tax deducted at source (TDS), including a reduction in the TDS rate for e-commerce operators from 1% to 0.1%, which is anticipated to significantly free up working capital for sellers.
However, Abhishek Teri, co-founder of Underrated Club had more expectations for more substantial tax reliefs and incentives, especially in light of rising raw material costs and global market pressures.
“While the budget does provide a solid foundation for growth, it falls short in addressing some of the immediate financial concerns of textile manufacturers. Continuous engagement with industry stakeholders will be crucial to ensure that the sector can fully leverage these initiatives and navigate the challenges ahead effectively,” he added.
Overall
Various consulting firms too have appreciated the strategic direction of the budget. “Giving a glimpse of the envisaged Viksit Bharat, Union Budget 2024 focuses on core issues such as empowering the youth through skill development, promoting ease of doing business for MSMEs, and boosting rural and urban infrastructure. With its three cornerstones—demography, digital and development—the Government has demonstrated a strong commitment to the holistic development of the nation,” Vivek Prasad – Partner and Markets Leader, PwC India said.
According to him, the substantial boost to both urban and rural infrastructure, with promised investments, has the potential to transform our economic landscape. Additionally, provisions under public-private partnerships, such as e-commerce export hubs, will empower our MSMEs to gain global recognition, driving growth and innovation. The budget also provides a framework for encouraging the growing startup ecosystem, which is necessary for inclusive development.
“Overall, this budget points the right amount of resources towards the right causes, in the right way,” Prasad added.
