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Experts On How Budget Can Empower Businesses And Consumers

Budget 2025: Giving an overview of the retail sector, Mr Parekh said that it has witnessed robust growth, and is projected to rise from $779 billion in 2019 to $1.8 trillion by 2030.

Experts On How Budget Can Empower Businesses And Consumers
Union Budget 2025 will be presented on February 1, 2025.

On February 1, 2025, Finance Minister Nirmala Sitharaman will present the Budget for the upcoming financial year, a plan that outlines income, expenses and financial goals for the country. India's gross domestic product (GDP) for the fiscal year ending in March 2025 is expected to grow at 6.4%, the slowest in four years and slightly below the government's initial projection of 6.5%-7%. This slowdown is largely driven by weaker performance in the manufacturing sector and reduced corporate investment. 

The Budget comes at a time when government faces a weakening rupee and Donald Trump's tariff threats. But according to Paresh Parekh, Partner and national leader for Tax - Consumer and Retail Sector at EY India, Union Budget 2025 holds significant promise amid these challenges, especially for the consumer and retail sector, a key driver of India's economy and job creation.

"To reignite growth, the focus must be on reforms that encourage both private and public spending, formalise the sector, and streamline the ease of doing business in the country," said Mr Parekh.

Giving an overview of the retail sector, Mr Parekh said that it has witnessed robust growth, and is projected to rise from $779 billion in 2019 to $1.8 trillion by 2030. "The direct selling segment is also on the rise, anticipated to reach $7.77 billion by 2025. During the 2024 festive season, the retail sector recorded a 7% year-on-year growth."

"In December 2024, India experienced a decrease in retail inflation to 5.22%, the lowest in four months, from the previous month's 5.48%. The easing of inflation was largely due to falling food prices, with food inflation reducing to 8.39% from November's 9.04%. Specifically, the rate of inflation for vegetables declined to 26.56% from 29.33%, and for pulses, it went down to 3.83% from 5.41%. This reduction in inflation has raised the anticipation of a possible reduction in interest rates by the Reserve Bank of India during its forthcoming policy meeting to promote economic expansion," said the expert.

He then listed the industry's expectations from the government from the Budget. 

Employment: The introduction of employee-linked incentive schemes and clarification on the implementation of new central labour codes are urgently needed.

National Retail Trade Policy: The swift adoption of this policy is essential to foster the growth of various retail formats and reduce regulatory burdens.

Finance: The provision of affordable financing and lower interest rates for small retailers is key to nurturing sector stability and expansion.

Digital Infrastructure: Continued support for initiatives like Digital India is expected, with policies that ensure fair competition between online and offline retailers and government investment in digital infrastructure to enhance e-commerce and retail technology.

PLI: Broadening the Production-Linked Incentive Scheme for the consumer goods industry could diminish import reliance and elevate India's international competitiveness in sectors such as electronics, household appliances, food and beverages, textiles, and furniture.

ESG: Incentives for sustainable practices are anticipated, including financial support for renewable energy integration in retail, tax benefits for eco-friendly products, and waste management initiatives.

Tax reforms are also anticipated to stimulate consumption and simplify business operations:

Consumption Stimulation: With the economy recovering, there is a strong expectation for tax reforms that lighten the fiscal load and promote savings.

Income Tax: An increase in the basic exemption limit from Rs 3 lakh to Rs 5 lakh is anticipated, particularly in light of the limited deduction options under the new tax regime.

Deductions: There is a call for an increase in the investment-linked deduction cap under section 80C, which has remained unchanged for years.

STCG Rate: A reduction in the Short-Term Capital Gains tax rate is sought after due to market volatility and the associated risks.

Cash Pool: The introduction of a "cash pool structure" within corporate groups would facilitate freer capital flow and is highly desired.

These measures aim to align tax thresholds and rates with inflation, offering significant relief to the people of the country. Budget 2025 should also enhance government spending to spur job creation and growth, thereby revitalising demand in the consumer and retail sectors and accelerating economic progress.

Leena A Phirke, Tax Professional, EY India also contributed to the article.

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