Support for MSMEs and investment in digital infrastructure rank among the foremost requests of industry representatives for the upcoming Union Budget 2024
Bengaluru: As the newly-elected NDA government is getting ready to present this year’s Union Budget on 23 July, retailers across different sectors are are hoping for a roadmap in the budget to drive sustained and long term economic growth.
Union Budget 2024 follows the interim budget presented on 1 February, before the Lok Sabha elections, which saw Prime Minister Narendra Modi’s government win a third term. This will be the new government’s first and Finance Minister Nirmala Sitharaman’s seventh consecutive budget presentation.
Even though the interim budget included key announcements regarding infrastructure, women, youth, research and development and agri producers, it did not address measures to boost consumption and individual taxation.
According to experts, Budget 2024 is expected to streamline tax slabs, enhance rural development, and incentivise states to promote manufacturing and support MSMEs.
IndiaRetailing engaged with leaders across the retail industry to gather their expectations for Union Budget 2024…
Support for MSMEs
Industry representatives anticipate the budget will bolster micro, small and medium enterprises by implementing transformative digital strategies in e-commerce.
“The upcoming budget presents a crucial opportunity to propel India’s MSME sector, the engine of our economy, onto the global e-commerce stage,” said Tanmay Kumar, chief finance officer at Shiprocket. “Building on initiatives like National E-commerce Policy and Free Trade Agreements, the budget can further streamline MSME participation.”
As per a report by TeamLease Services, by 2027, internet penetration is expected to reach 80% and e-payment usage in the country is expected to reach 70%. But only 6% of MSMEs actively sell through e-commerce platforms at present.
“To promote digital commerce, the government ought to invest heavily in Open Network for Digital Commerce (ONDC) and digital infrastructure development,” said Balasubramanian A, vice president at TeamLease Services.
Speaking for the technological skill training for the MSME sector, Anuraag Gambhir, managing director of Shopclues said that addressing the existing skills gap between MSMEs is paramount, necessitating robust handholding and counselling programs to enhance digital literacy and technical proficiency.
“Collaborative efforts with e-commerce marketplaces and local institutions are pivotal in bridging these gaps,” he added.
Import duty relief
In a time when consumer preferences are shifting and economic pressures are mounting, reduction of import duty will ensure the resilience of the retail segments.
Speaking for the luxury retail sector, MP Ahammed, chairman of Malabar Gold & Diamonds said, “We urge the government to reduce import duties on precious metals, specifically gold, silver, and platinum bars. This is essential to curb gold smuggling, which has seen an unprecedented increase.”
He highlighted that the duty reduction will also release the duty blockage, providing more working capital and a duty drawback on exports will help to leverage the India-UAE Comprehensive Economic Cooperation Agreement, boosting exports and generating employment.
Speaking on behalf of the garment industry, Karan Singh, founder of the direct-to-consumer (D2C) menswear brand Aristobrat, highlighted the challenges posed by high import taxes on machinery for specialised fabrics, which stops Indian manufacturers from acquiring the necessary technology to produce quality fabrics.
“Import tax reduction will enable Indian manufacturers to access the necessary technology, improving their capabilities and competitiveness both domestically and internationally. By studying neighbouring nations, which invest in machinery, India could enhance its textile industry and reclaim business lost to other nations,” added Singh.
Infrastructure InvestmentMSME
Retailers across all categories are foreseeing increased allocation for infrastructure, both geographical and digital, in the upcoming budget.
“Increased spending on infrastructure such as roads, highways and rural development, would create jobs and improve connectivity, potentially leading to higher disposable incomes and increased demand for consumer goods,” said Rajat Agrawal, chief executive officer of Barista Coffee.
Logistics players are actively pursuing initiatives to enhance their technological capabilities and operational efficiencies.
Ajay Rao, chief executive officer of Emiza, a third-party logistics and supply chain service provider, stated, “We anticipate prioritisation of freight corridors, modernisation of tracks and upgrades to infrastructure.”
Echoing Rao, Balasubramanian from TeamLease Services emphasised the need for improvements in logistics and delivery infrastructure across India.
He noted that these enhancements could benefit both e-commerce businesses and consumers, potentially reducing delivery costs by 10-15% and expanding the e-commerce market by Rs 20,000-25,000 crore within the next three years, which can lead to massive job creation in e-commerce logistics, warehousing, and related sectors.
Representing global retailers in India, Susanne Pulverer, chief executive officer of the Swedish multinational conglomerate Ikea India, is looking forward to the continued rapid expansion of digital infrastructure across the country.
Kadambari Lakhani, director of the Mumbai-based Baccarose Perfumes & Beauty Products, stated that support for digital infrastructure, such as subsidies and incentives for digital payment systems and e-commerce platforms, will enhance consumer experiences and increase sales in the retail industry.
Tax cuts and incentives
Tax incentives, such as reduced rates or tax holidays, lower the overall tax burden on retailers, enabling them to reinvest the saved capital into expanding operations.
“Simplifying the goods and service tax (GST) structure would ease compliance burdens for retailers, allowing them to focus on their core business and make the playing field fair for all,” said Agrawal of Barista Coffee.
“As of now the food and beverage business is not eligible for input credit on both capital expenditures and operating expenses, which is the biggest impact on the earnings and cash flows of the business,” he added.
Vidita Kochar Jain, co-founder of lab grown diamond brand Jewelbox, stated that, implementing tax incentives and subsidies will promote homogeneous production and reduce reliance on imports, fostering a more self-sufficient industry.
She also called attention to simplifying regulatory processes, reducing compliance burdens and enhancing transparency, which are essential to facilitate smoother business operations for manufacturers, traders and jewellers alike.
