NEW DELHI — The Beatles’ popular song “Eight Days a Week” could describe the wish list of Indian retailers eager to keep their stores open as much as possible, as the country’s retail growth speeds on at more than 20 percent a year.
Malls and department stores are closer to the goal, being allowed to stay open seven days a week. But until now, small- and medium-sized shops and high-street retailers in India have only been permitted to be open six days a week.
That is now set to change.
On Monday, finance minister Arun Jaitley’s Union budget announcement included a provision that would allow small- and medium-sized stores to be open seven days a week. This is expected to spur sales and increase business.
“Retail trade is the largest service sector employer in the country. Many more jobs can be created in this sector, provided the regulations are simplified. If shopping malls are kept open all seven days of the week, why not the small and medium shops? These shops should be given the choice to remain open on all seven days of the week on a voluntary basis,” the finance minister said in outlining his priorities for the year financial year 2016-17.
Kumar Rajagopalan, chief executive officer of the Retailers Association of India, described the move as a positive one. “Permission to keep stores open 365 days will help retailers increase sales, generate more employment, create customer convenience and also increase tax collection for the government thanks to increased sales,” he said.
It is also expected that this would put smaller retailers that have been protesting against bigger retail players such as Wal-Mart and department store chains on a more solid footing.
“Permitting seven days of operation for small- and medium-sized shops in the unorganized [independent] retail segment will allow them to compete more effectively with malls. This will boost the demand for retail stores on high streets significantly,” said Arvind Jain, managing director of Pride Group, a property development conglomerate.
“This support and encouragement to the retail trade will surely further drive consumption, which in turn will help the manufacturing sector and job creation,” said Krish Iyer, president and ceo of Wal-Mart India. He described the retail sector in India as the country’s “hotbed of economic growth.”
But while the proposed budget boosted retail, other segments didn’t fare as well.
Branded apparel that costs more than 1,000 rupees, or $14.58 at current exchange rates, will now have additional duties. There will be a 2 percent added duty paid by those who do not claim Central value added tax (CenVAT) on various raw materials. Manufacturers that claim the tax will need to pay 12.5 percent excise duty.
“It is disastrous for [the] textiles and apparel industry,” said Rahul Mehta, president of the Clothing Manufacturers’ Association of India, referring to the additional tax burden.
The footwear industry welcomed a step taken on Monday.
“Though we were expecting total removal of excise on footwear, the announcement to cut the excise duty on leather footwear priced more than 1,000 rupees [$14.58] per pair would be beneficial to leather manufacturers and many other brands in the footwear industry,” said Harkirat Singh, managing director of Woodland India. Woodland retails footwear, apparel and accessories and has more than 500 stores in 250 cities in India, and others in Hong Kong and the Middle East. “This definitely is a step toward promoting production facilities in India thereby supporting the ‘Make in India’ campaign,” he said.
Less than pleased were retailers in the costume jewelry market, which has been growing at more than 20 percent a year with stores like Accesorize of the U.K. growing fast in malls and e-tailers such as Voylla. The increase in duty from 10 percent to 15 percent for costume jewelry is expected to help grow the market for Indian-manufactured accessories. Meanwhile, gold and diamond jewelry will see an increase in excise duty of 1 percent, causing grave concern in the jewelry segment. A similar duty imposition in 2012 was met with stiff resistance from the industry, and was reversed after almost a month of protest.
The 1 percent excise duty without CenVAT or 12 percent with CenVAT on articles of jewelry — excluding silver jewelry, other than studded with diamonds and some other precious stones — would have an adverse effect on sales, according to several jewelers.
Ishu Datwani, founder of Anmol Jewellers, described the additional duty as a “regressive step which will be time consuming and will only increase paperwork.”
“This will have a great impact on the gold and jewelry portfolio,” said Rajiv Popley, director of Popley Group.
But Vishwas Shringi, founder of Voylla Fashions Pvt. Ltd., observed that overall, business could be expected to be much improved in India this year.
“The budget made a strong case for promoting start-ups in India with a 100 percent tax rebate on profits announced for them for three years,” he said. “The government has made an excellent move by introducing one-day speedy registration of the companies. This will boost the number of start-ups immensely. Another big push by the government for startups is a tax holiday for three of five years of setting up the company. This will help start-up manage the cash well and will give a very conducive environment for them to flourish. It will help meet the working capital needs during the initial years.”