Sansad TV Perspective: Draft Retail Trade Policy

Anchor: Vishal Dahiya

1. Dr. S.P. Sharma, Chief Economist & Director of Research, PHD Chamber of Commerce and Industry
2. Dr. Subhash Chandra Pandey, Former Special Secretary & Financial Advisor, Ministry of Commerce and Industry, GoI
3. Praveen Khandelwal, Secretary General, Confederation of All India Traders (CAIT)

Context: DPIIT has sought views on the draft National Retail Trade Policy.

Highlights of the discussion:

• Introduction
• Significance of the policy
• Reasons/Significance
• Associated challenges
• Way Ahead

Introduction:

• The Department for Promotion of Industry and Internal Trade (DPIIT) has sought the views of 16 departments and ministries on its draft national retail trade policy. 
• According to reports, this policy would focus on formulating strategies to provide a globally competitive and sustainable environment for the overall development of retail trade through targeted efforts. 
• India is the world’s fifth-largest global destination in the retail space. 
• According to a report by Boston Consulting Group and the Retailers Association of India released in early 2022, the retail industry is likely to see 10 percent annual growth to reach about USD 2 trillion by 2032. 
• Another report by CII-Kearney released in 2020 points out that a cohesive national retail policy can help generate 30 lakh more jobs by 2024.

Key Aspects and Significance of Draft Retail Trade Policy:

• In order to support the rising domestic demand and ensure competitiveness in the marketplace, a policy of this type is very important.
• There is a need to provide Ease of Doing Business not only to the large and formal conglomerates but also to small retailers as they are growing at a fast pace.
• This in turn would result in the overall growth of the economy.
• A draft policy like this is a great development, especially at this critical juncture where India has to create and support its demand trajectory and make its growth rate sustainable.
• The policy will cover aspects like the upgradation and modernization of the existing retail format in India. 
• The policy would create a more synchronized business environment and deepen the business strategy in the coming times.
• It will create more employment opportunities, especially benefitting the rural segments. Moreover, these self-employment opportunities would be more sustainable for the masses.

Challenges associated with the Retail Trade Sector and the new draft:

• The April to November 2022 trends show that retail sales were 21 percent more than the pre-pandemic level of 2019. The recovery in all areas from footwear to restaurant services ranges from 18 to 22 percent. Notably, this market is unorganized or self-organized.
• Another significant challenge is the linkage of several associated policies like labour laws, Ease of Doing Business policies, credit policies, etc. Integration of these policies along with the Municipal level policies like the street hawkers policy is a serious challenge.
• Other aspects include the formalization and digitalization of unorganized small retailers.
• All levels of government should work in tandem with each other to put in place a holistic policy. 
• It is unfortunate that there are no authorities or policies for retail trade in India. However, DPIIT has been lately looking at the functioning of the sector.

Industry’s response and expectations from the draft proposal:

• The industry has a lot of hopes from the policy, as they were demanding it since 2014.
• The National Retail Trade Policy must lay down the fundamental parameters of the retail trade.
• The industry is expecting a holistic and homogenous policy for all four verticals under which they can work independently without encroaching on each other’s domain.
  • The four verticals of retail trade are Corporate retail, Non-Corporate retail, E-commerce, and Direct Selling.
• There is also concern about the finance and credit facilities for the traders, which should be addressed by the draft policy.
• There is a demand for a ‘One Nation One Licence’ policy on the lines of the ‘One Nation One Tax’ (GST) regime. It should be noted that there are 22 types of licences. This complex scenario of licences should be abolished.
• The requirement of infrastructure building in the commercial markets has to be mandated on state governments and local self-governments through the policy. It is important to develop market avenues as even now, 80 percent of trade is conducted through traditional retailers.
• The confluence of online and offline trade is also a serious concern of the industry, where they are demanding that not more than 20 percent of products should be traded through e-commerce sites.

Retail Trade Policy and E-commerce:

• There is no specific policy for e-commerce in India and these ventures are governed through the FDI policy.
• E-commerce platforms have been accused of predatory pricing, deep discounting, owning inventories, etc. They appear to be anti-competitive to the retailers and hamper their business.
• It is often argued that there is a nexus between the E-commerce platform, brand owners, and banks. For example, the brand owners reserve certain products exclusively for e-commerce business and banks provide cashback offers on transactions.
• From a policy perspective, it is not feasible to lay down a quota as both e-commerce and retail trade are market driven. However, in this direction government has launched several initiatives like Open Network for Digital Commerce.
• It should be realized that online markets and e-commerce platforms create additional aggregate demand in the economy.
• E-commerce market also supports the gig economy and provides employment to many.
• The tussle between the two sectors can be a serious concern for the government.

For information on the Gig Economy, read here: Overview of the Gig Economy in India

Way Ahead:

• The policy should be both consumer-friendly and business-friendly in order to move ahead in the global economy charts.
• The licence complexity should be eased for small retail businesses, so they can achieve their full potential and contribute to the growth story of India.
• The balance between the retail trade policy and the E-commerce policy should be maintained as they are complementary to each other and should work in a homogenous fashion. In this direction, the following steps can be taken:
  • An e-commerce policy and rules should be framed that should adhere to the Consumer Protection Act.
  • A regulatory authority on the lines of SEBI and TRAI can also be established.
  • However, in this endeavour, it is important to realize that international investors are not overlooked.
• The new policy should also take into account labour laws.
• There should be a conducive environment for both domestic and international players with a level playing field.

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