How the union Budget 2015-16 impacts the overall Retail scenario?

Amidst high expectations and speculations, the Union Budget for fiscal year 2015-16 presented by the Honourable Finance Minister Arun Jaitley, had the distinct touch of the new regime.
How the union Budget 2015-16 impacts the overall Retail scenario?

Amidst high expectations and speculations, the Union Budget for fiscal year 2015-16 presented by the Honourable Finance Minister Arun Jaitley, had the distinct touch of the new regime. Referred to be as one of the balanced budgets, it has accelerated the long- term growth along with satiating different sectors.  Retailer Media finds out the industry perspective about the Budget announcement for different sectors and their impact.

Retail sector

The industry status has not been granted to Retail; however, the sector has appreciated the announcement of roll out of Goods and Services Tax (GST), which is likely to be implemented by next fiscal year. Also, government’s focus on simplifying the process of ‘Ease of doing business’ has been lauded, for it will help in building confidence and enabling internal trade in the country.

According to Rajat Wahi, Partner and Head of Retail sector, KPMG India, “The Union Budget 2015–16 envisages a balanced and long-term economic and industrial growth for India. With positive consumer sentiments and softening inflation, budget announcements on GST, revision of excise/custom duty structure, fund allocations for Skill development and rural markets development would ensure long-term consumption boom for the Indian retail sector.” 

While eCommerce is creating buzz in Indian retail market, the online players had high expectations from the budget. Though a couple of welcome measures including creation of a conducive environment for inflow of foreign investment and improvement in ease of doing business were part of the announcement, the budget lacked making huge announcements.

Commenting on the announcements, Praveen Sinha, Founder and MD, Jabong.com said, “A big push to technology has been given by the government with its decision to reduce the tax on royalty and fees for technical services from 25 per cent to 10 per cent apart from setting up a 'startup fund' for technology based start-ups with an initial corpus of Rs 1,000 crore.”

Crtitcism for the budget came in from the retailers too. Devita Saraf, CEO and Design Head – Vu Technologies said, “I believe the budget has been quite disappointing. We were hoping for some standard operating procedures whereas the excise duty has been increased on manufacturing. But overall, there hasn’t been much considered to materialize Make in India and Digital India initiatives.”

The expectations of eCommerce industry stakeholders from the Union Budget were definitely high this year, and while the Finance Minister provided a set of welcome measures, he stayed away from big policy announcements specific to the online space.

In words of Ashvin Vellody,  Partner – Management Consulting, KPMG India, “The Government has proposed introducing GST, which will help eCommerce companies rationalise supply chains by addressing  the taxation issues. Steps announced to address infrastructural challenges will help increase reach of eCommerce, to improve connectivity in the hinterlands under the Digital India Program by accelerating the National Optical Fibre Network (NOFN) rollout.”

“It is a welcome move to encourage job creators by introducing a 1000 cr fund to enable the technology start-up eco-systems to incubate new ideas. If these plans can be effectively executed on the ground, it will provide a fillip to the digital/ ecommerce sector,” Vellody added.

According to Sameer Parwani, CEO & Founder, CouponDunia, “The hike in service taxes will make the deals expensive. There are no clear indications of the rate at which GST will come in, however it is largely expected that the rates would be higher as compared to the Service tax rates existing in F Y 14-15.”

50 per cent reduction in excise duty on leather footwear of retail sale price exceeding the value of Rs 1,000 is one among the major announcements of this budget.

Commenting on the same, Harkirat Singh, Managing Director, Woodland said, “Though we were expecting total removal of excise on footwear, the announcement to cut the excise duty on leather footwear priced more than Rs 1,000 per pair would be beneficial to leather manufacturers and many other brands in the footwear industry. This definitely is a step towards promoting production facilities in India thereby supporting 'Make in India' campaign.”

Amidst the waivers, the increased service tax is expected to impact the margin of retailers thereby inflating cost of products. Though this hike in service tax would increase the burden on rents and facility charges for retailers, services of pre-cooling, waxing, retail packing, labeling of fruits and vegetables has been exempted from this hike, which is a relief.

In words of Karan Mehrotra, Co-founder & CEO, Localbanya.com, “Service tax increase to 14 per cent - With timeline for implementation of GST being 1st April 2016, the increase in service tax will impact our margins. This is not a welcome move.”

“Streamlining FDI with composite caps is a good move, however we expected more clarity on FDI in multibrand retail,” added Mehrotra.

Commenting on FDI in retail, Kenny Shin, CEO STAR CJ Network asserted, “Relaxation and/ or doing away with the FDI limit when it comes to home shopping and e-tailing will not only benefit Indian consumers but also prove pivotal in creating job opportunities in India. This will also boost growth momentum and benefit local manufacturers and traders.”

In words of Sharat Dhall, President, Yatra.com, “The travel and tourism sector will take strong positives from the focus on development of key heritage sites and building of roads across the country as well as the move to extension of the visa on arrival scheme to over 150 countries, all of which should drive growth in the sector."

FMCG

While GST and promotion of ‘Make in India’ campaign has been key takeaways for FMCG market, a prominent hike in excise duty on cigarettes, cigars, cheroots etc were not welcomed by manufacturers as it will burden the manufacturers.

Rakesh Dugar, Chairman and Managing Director - Mitashi, a leading Indian homegrown consumer durables brand was of opinion, “Make in India and now ensuring employment to our youth, we have to make India the manufacturing hub of the world is a very good move announced in the budget presented by the Finance Minister Mr Arun Jaitley. Reduction in custom duty on raw materials and intermediaries is good for the sector.”
He further added, “The fast paced clearance for starting business in India will attract more investments to the country. Introduction of a comprehensive bankruptcy code for the ease of doing business by 2015-16 is an encouraging one." 

Ramesh Bulchandani, Chairman KMB Group opined, “While FDI investment in this sector is not seen as a priority, so it looks like a slog period for retailers till the reforms kick in by 2018.”

Citing this budget as a balanced one, Vaibhav Singhal, MD & CEO, Savemax asserted, “This budget will lay the foundation of major structural changes in the Indian economy in the coming years. The hike in individual tax exemption is a welcome step that will give more money in hands of the people.”

Talking on reduction in corporate tax, Soon Kwon, MD, LG India, commented, “We welcome the changes in taxation policy, with the reduction in corporate tax over four years and rationalisation of custom duty. Efforts being made by the current government towards achieving its vision of ‘Make in India’ policy is evident in this budget and hopefully it will turn manufacturing in India into a more profitable and business-friendly proposition.”

Hoping the current budget to be a game changer for SME industries, Vijay Shekhar Sharma, Founder, Paytm said, “Schemes like funding unfunded, special fund for startup are good initiatives. I hope this government implements these great initiatives and bring double digit growth dream back to reality.”

In words of Rohit Chadda, MD and Co-Founder, foodpanda, “While overall it seems to be pro-development, but a lot more could have been done specially to boost the already booming start-up environment in the country.”

Gems & Jewellery

To encourage people to monetise the yellow metal rather than storing it in banks, Gold Monetisation Scheme has been launched to let depositors earn interest in their metal account and jewelers to obtain loan on their gold account.

Praising the step, Gaurav Singh Kushwaha, CEO and Founder, BlueStone.com said, “Sovereign gold bonds and gold monetisation will reduce the dependence on gold imports and encourage gold exports. It will also reduce the dependence on gold coins as bullions as investment instruments. The gold jewellery in the lockers will be mobilised which is a good sign.” 

Making a point on developing an Indian gold coin bearing Ashok Chakra, T.S. Kalyanaraman, Chairman and Managing Director, Kalyan Jewellers said, “The proposed gold coins with the Ashoka Chakra will also encourage recycling of gold among domestic consumers and give a fillip to ‘Make in India’ initiative.”

Further elaborating on quoting of PAN being made compulsory for any sale/purchase exceeding the value of Rs one lakh, he added, “The implementation will have to be in a phased manner considering the fact that a significant class of consumers of gold and gold jewellery, especially in rural India, may not have a PAN card and are yet to be integrated into the nationalised banking network.”

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