Budget expectations 2022

The frequent lockdowns, global and local travel restrictions, and other disruptions have fundamentally changed consumer behaviour across categories, with far reaching impact on manufacturing, retail (both offline and online), distribution, payments, and supply chains. It has defined a “new normal” for businesses and may have altered business dynamics forever.

The government can support the growth of consumer industry by improving ease of doing business to accelerate multi-channel or hybrid capabilities, creating policies to support technology development, and building infrastructure to optimise retail supply chain. This will enable the players in the industry to operate efficiently and thrive in a new business landscape.

The pandemic also drastically affected the automotive sector, but it is also bouncing back over the last two quarters, and India is expected to be the third largest automotive market by 2026.2 The government is expected to take initiatives to boost the sector, including product linked incentives, etc., (starting from FY2023 for five years). The sector will be integrating technologies in the future, with electrified, autonomous, shared, and connected cars growing significantly.

Expectations  -

Top four asks:

1. Ease of doing business to accelerate multi-channel or hybrid capabilities:

There was a significant increase in e-commerce activities during the pandemic as consumers shopped, studied, and worked from home and opted for contactless delivery. The future of the retail sector will be defined by an omni-channel approach where online and offline channels will not only compete but be complementary to each other. The way forward for retail will be a blend of brick-and-mortar stores and online selling platforms, with both likely to continue to grow and thrive in India.

For growth in the hybrid capabilities, it is important for the government to make budgetary allocations and implement policies to support retail growth in India, including a common regulatory framework for retail across whole country. It should also push for the single-window clearance portal for all approvals, clearances, and retail licenses, including reduction in the number of licenses that retailers need to apply for to create a “one-stop-shop”. This will enable investors, entrepreneurs, and businesses to obtain approvals as well as clearances for expanding brick and mortal retail stores across India. In addition, to promote cross-border ecommerce from India, and to enable SMEs to export their products seamlessly to consumers worldwide through the online platforms, the government should look at easing documentation and other rules for export and return of products. This will encourage global ecommerce from India and allow us to reach US$10 billion in exports and pave the way for a robust multi-channel retail ecosystem in the country.

2. Government can create policies to support technology development:

The acceleration of technology adoption across the consumer and retail industries has become a critical aspect for surviving in the new normal. As consumers desire a more personalized experience, most retail businesses are re-thinking their in-store and online customer experience (CX) and engagement. Retailers have to embrace technology and digitise rapidly to make their businesses more agile to cope with massive disruptions. With the shopper journeys becoming non-linear, enabled by technology and connectivity, retailers are learning to proactively respond to consumers’ new shopping preferences. COVID-19 also pushed the adoption of digital technology, enabling kirana stores/neighbourhood mom-and-pop shops to adopt technology to expand their businesses. More kirana stores are going online, providing app-based ordering and last mile delivery; offering a variety of payment options and automating their bookkeeping, invoicing, and inventory management processes.

Technology has been a high-priority area for the government. The government can further support this by accelerating digital infrastructure, creating policies to provide an environment for secured transactions and to ensure protection of consumer data, thereby creating a favourable environment for adoption of technology in retail, especially general trade/kiranas. The government can also further incentivise and encourage organised players to help modernise kirana stores by providing grants, low-interest loans, tax incentives, etc., to encourage start-ups to develop innovative solutions to help modernise kirana stores.

3. Building infrastructure to optimise retail supply chain:

In the new normal, the retail environment is likely to continue to constantly evolve and it entails that retailers transform their in-store supply chains and operating models to become more flexible, adaptive, and resilient. Retailers will move towards offering real-time visibility of product availability to customers through item level tagging, computer vision and enable in store returns for online purchases. Virtual try-ons for apparels could reduce the cost of reverse logistics. Retailers are moving towards frictionless supply chain to ensure safety and speed of execution and India is among one of the leading nations in developing technology led efficiencies. As more retailers are moving towards building their supply chain capabilities, it is imperative that the industry supports commercial deployment of digital supply chain networks.

The government has announced its plans to develop multimodal logistics parks, which would make logistics more efficient, help reduce operating costs for retailer and offer consumers a wider assortment. This will create new cost and revenue opportunities through enhanced connectivity mechanisms. The government can also further push for large scale manufacturing hubs to offer end to end production facilities for packaged foods manufacturing to enable more companies to launch packaged foods – this will not only make it easier for brands/entrepreneurs to bring new products to the market, but more importantly, reduce the massive waste in the food sector that India has to cope with.