India is the second-most populous country with a middle class that exceeds the total population of Europe. It is also home to the world’s largest young population. This means the potential of high-demand generation, especially in the retail sector. The Indian retail sector is already one of the largest in the world, estimated at almost US$ 900 billion in 2020, and is expected to grow to US$ 1.7 trillion by 2026.
Despite being the largest service sector employer in India, the retail sector is largely unorganized. It is characterized mostly by isolated and standalone outlets and Kirana stores. The emergence of larger retail stores like Big Bazar, Pantaloons, Shoppers Stop, etc, have to some extent changed the face of Indian retail, however, the biggest game-changer in retail has been online retailers. It is putting a lot of additional pressure on the already struggling retail sector, and the sector requires proper policy support.
A report by CII states that with proper support from the government, the retail sector can create 3 million additional jobs by the year 2024. This will also go a long way in the country shedding the burden of unemployment and move faster towards the goal of a US$ 5 trillion economy.
Need of a National Retail Policy
Today there is no uniform policy or regulation governing the retail sector in India. Retailers face several obstacles in starting their business, right from obtaining numerous licenses to dealing with multiple agencies for smooth and efficient operations. They also face hindrances in raising funds to start a new venture or to expand their established business. All this is severely stunting their growth potential. A cohesive National Retail Policy is the need of the hour, more so in these challenging times.
Various stimulus packages have been announced by the government for the MSME sector but Retail is not covered in this sector. The inclusion of retailers and traders under the MSME sector will make the stimulus accessible to the retail sector and help it overcome the Covid crisis.
The ongoing discussions between the government and the industry have given the sector hope of a formal regulatory framework in near future.
Expectations from the National Retail Policy are:
Ease of Doing Business: The multiplicity of governing authorities makes it difficult for retailers to smoothly run their operations. It increases the difficulty of even starting a retail business. From the national retail policy, the retailers expect a single-window clearance mechanism and ease in the compliance burden to start a business and keep it operational. The trickle-down effect would be an improvement in employment numbers too.
Ease in Raising Capital: Once a formal policy for the sector is released, raising capital for the business will become easier and more accessible for all. This will encourage new entrepreneurs to enter business and the incumbents to expand their operations with the ease of credit and loan facilities. This coupled with the rationalization of the licensing process will give a much-needed boost to the sector.
Technological Up-gradation: With proper government policies in place and the availability of capital, the retail sector will see investment in new technologies. This will also help remove inefficiencies and help resolve the issue of disguised unemployment in the sector. Technology will also reduce the gap in logistics and supply chains. Covid has also revolutionized the digital landscape, consumers have also shown a greater affinity towards e-commerce. This has pushed the retailers to make their business more technology-centric. They would need to make fresh investments for this technology upgradation.
Focus on Reforms: The government will have to create more favorable policies to revive consumer demand and create positive sentiment. The need of the hour is not only to regain retailer confidence but also that of the consumer. A formal retail policy will keep the conversation alive and ensure the continuous evolution of the framework. We will have to look at newer models to bring a sustained boom in the retail industry, which in turn ensures the growth of brands and commodities sales.
Skill Development: With a policy and a formal regulatory framework in place, the industry will also be able to focus on skill development and skill upgradation. A skilled workforce will not only enhance the efficiency in the sector but also will reduce wastages and improve customer satisfaction.
India is going through a phase of rapid reforms. The government is introducing revolutionary reforms in almost all the sectors across the economy. Now it’s the turn of the retail sector. Being the primary source of employment for millions of people in the country, the sector cannot be ignored any longer.