Tax cuts and increased investment in smaller cities are among the top demands of sector representatives for the upcoming Union Budget 2025
Bengaluru: It’s that time of the year when every industries and businesses in India voices their needs through media channels, as the government prepares to present this year’s Union Budget on 1 February.
This budget follows the Union Budget 2024, which was presented in July after the Lok Sabha elections, in which Prime Minister Narendra Modi’s government secured a third term. This will be the second budget of the new government and the eighth consecutive budget presentation by Finance Minister Nirmala Sitharaman.
The fashion and lifestyle industry, a vital contributor of India’s economy, has outlined its own set of expectations, hoping the government will take measures such as investing in smaller cities, offering incentives for brands, supporting MSMEs, and tax reduction.
IndiaRetailing engaged with retailers across the sector to gather their expectations for Union Budget 2025. Here are the top four priorities they collectively called for…
Investments in tier-2 and beyond cities
Retailers are increasingly seeking more capital investment in tier-2, tier-3, and smaller cities, driven by the unexpectedly high demand and rising disposable income among residents. These once peripheral areas are now transforming into vibrant centres of economic activity.
“We expect the budget to prioritise investments in tier-2 and tier-3 cities by developing textile hubs and manufacturing units,” says Anant Tanted, Founder and CEO of The Indian Garage Co., a Bengaluru-based menswear brand.
“This will not only foster local employment but also support the “Make in India” initiative, which is crucial for India’s transformation into a global apparel manufacturing hub,” he added.
Ackshay Jain, founder of the multi-brand streetwear retailer Culture Circle is seeking more incentives for physical retail expansion in tier-1 and tier-2 cities.
On a similar note, Shish Kharesiya, Founder and CEO of the personal care brand Baby & Mom Retail, is anticipating logistics and warehousing infrastructure investments in these cities.
“It is essential to reducing delivery timelines and operational costs, benefiting the entire retail ecosystem. Also, investments in sectors like railways, data centers, and highways will push the e-commerce industry,” adds Kharesiya.
Reduction & rationalisation of GST
Like many individuals and businesses in India, the retail industry is also calling for a reduction in Goods and Services Tax (GST) rates to help drive consumer spending.
High GST rates have often been a barrier, particularly for price-sensitive categories such as apparel and personal care, limiting affordability and dampening demand in a competitive market.
“Private consumption is the cornerstone of retail growth and we look forward to government policies to open up the purse strings of consumers through higher tax exemptions slabs and reducing GST on essential personal care products could provide much-needed relief to the middle class,” says Shriti Malhotra, Group CEO of Quest Retail, the franchise partner of The Body Shop India.
Lower GST rates could also help bridge the gap between organised and unorganised sectors, fostering compliance and furthering the government’s goal of economic formalisation.
Supporting this notion, Satyen Momaya, CEO of the apparel brand Celio India, emphasises that the apparel and lifestyle retail segments, which have faced challenges due to subdued demand and inflation, would benefit from maintaining or reducing current GST rates for products priced at Rs 1,000 and above.
They are also hoping for a rationlised GST to address challenges posed by the current multi-tiered tax structure. A simplified GST framework can reduce compliance burdens, lower operational costs, and improve ease of doing business, especially for micro, small and medium enterprises (MSMEs).
Extension of PLI Scheme
The current production linked incentive (PLI) scheme for textiles is largely centered on synthetic products, an area where India’s garment industry has limited expertise. To unlock the sector’s full potential, it is essential to broaden the scheme’s scope to include all garment categories.
“There is a huge opportunity to increase India’s exports in apparel as buyers are looking to increase their sourcing from India,” says Santosh Kataria, President of Clothing Manufacturers Association of India (CMAI).
“Currently, India exports $15 billion in apparel, just 3% of the $510 billion global market. With buyers seeking alternatives to China and Bangladesh due to geopolitical shifts, India has the potential to double its share in 4-5 years. Expanding PLI support to the garment sector could accelerate this growth significantly,” adds Kataria.
PLI will play a crucial role in neutralizing the cost advantages held by competitors such as China, Bangladesh, and Vietnam in export markets, which is vital for the growth of Indian garment exports.
“Countries like Vietnam and Bangladesh benefit from fair trade agreements with Europe, offering a 9.6% cost edge. China also gives 13% value added tax reimbursement to its exporters. Hence, PLI for garments can help India counter this global competition,” explains Kataria.
Incentives for sustainable and digital initiatives
As ticking the sustainability checkbox becomes non-optional, brands are seeking financial support to adopt eco-friendly practices, circular economy models, and green technologies to reduce their environmental impact.
“We urge the government to prioritize incentives for green initiatives, such as incentives to retailers for adopting sustainable packaging and energy-efficient retail operations,” says Malhotra of Quest Retail.
Echoing this perspective, lab-grown diamond brand Solitario’s founder Ricky Vasandani highlights that consumers are becoming more aware of the environmental and social impacts of their purchases, leading to shifting expectations. As this awareness grows, businesses will face greater pressure to ensure responsible sourcing, particularly of raw materials.
Simultaneously, the rapid digitalisation of the retail sector necessitates investments in advanced technologies like artificial intelligence (AI), augmented reality (AR) and virtual reality (VR) to enhance customer experiences and operational efficiency.
Furthermore, these can help businesses expand their online presence, integrate omnichannel strategies, and cater to the demand for e-commerce and quick commerce solutions.
