Retail to get push from rural economy, Govt reforms: Report

Mumbai: The retail sector will get an impetus from the spur in economic activity in rural areas on the back of rise in rabi crop planting, according to a report.

Besides, low level of inflation and the Government's reform initiatives are likely to provide boost to the sector in 2017, said the report by Dun & Bradstreet.

In the past few years, there has been a shift in consumption pattern, with people even from small towns moving beyond necessities and consuming luxury products that were once sold only in metro cities, it noted. As a result, retailers are now focusing on expanding to more tier II and III cities in India.

Further, given the increased competition and high operational costs (such as for land and labour) in metros and tier I cities, the tier II and tier III cities could be a better choice for many organised retailers, it said.

The report said the implementation of GST is expected to make movement of goods less cumbersome for retailers, including lower cost of logistics and distribution due to reduced paperwork.

Further, the implementation of GST, tax on services will be available for set off against tax on goods. The retail sector was adversely impacted post- demonetisation, given the short-term fall in consumption demand consequent to the lack of liquidity.

Small traders were more affected than the organised retailers due to their significant cash dependence, it said. The unorganised segment is  expected to witness increased usage of credit/debit cards and e-wallets in the coming months, owing to the demonetisation move.

The e-retailing segment, which witnessed significant growth in the past few years, is expected to maintain its growth momentum in 2017, the report noted.

While the e-retailing segment is competing with the traditional brick-and-mortar stores to increase its market share, it is also faced with certain challenges such as rising logistics supply chain costs which needs to be addressed.

Regulatory reforms are also expected to fuel growth of the retail sector. In 2016, the Government allowed FDI up to 51 per cent in multi-brand retail while it removed cap on single brand retail.

The Centre introduced Model Shops and Establishments Bill 2016, and one of the provisions of this bill allows retailers to operate 24-hour which is expected to provide a boost to the retail market, especially in the metros.