Introduction

India is among the fastest-growing economies in the world, driven significantly by a rapidly expanding middle class that fuels growth through retail consumption.

Retail is a pillar of the Indian economy, contributing approximately 10% to GDP. The Indian retail market, currently estimated at USD 1 trillion, is projected to reach USD 2 trillion by 2032, supported by a population of 1.4 billion consumers.

Beyond its economic contribution, retail is a major employment generator, directly and indirectly employing around 50 million people. It is the fastest-growing employment sector and second only to agriculture in terms of direct employment.

Retail’s benefits are broad-based, spanning institutional, economic, and social dimensions. Modern retail enhances transparency, increases tax compliance, and contributes significantly to government revenues.

RAI strongly supports the Government of India’s vision of inclusive and sustainable growth. With the right policy support, the retail sector can provide a substantial impetus to this vision.

Through this Pre-Budget Memorandum 2025–26, RAI highlights key areas that require Government attention to unlock growth potential and strengthen the retail sector’s contribution to GDP and employment.

Summary of Key Recommendations

1. Provide special focus to the retail sector as a long-term growth driver.
2. Prioritise demand- and consumption-led growth measures in the Budget.
3. Increase disposable income through tax reliefs to stimulate consumption.
4. Recognise F&B retail as a priority and essential service.
5. Expedite formulation and implementation of the National Retail Policy.
6. Extend all MSME benefits to retail and wholesale traders.
7. Promote digital transactions through MDR waiver/subsidised MDR.
8. Enable digital and technological upgradation of MSME retailers.
9. Provide 150% depreciation on new capital investments with accelerated timelines.
10. Reintroduce EPCG Scheme for the retail sector to build modern infrastructure.

1. Boost Retail and Consumption

To ensure sustained growth, the Union Budget 2025–26 must focus on stimulating demand and consumption.

Lower personal taxes and targeted reliefs will increase monthly disposable income, boost consumer sentiment, and directly support retail growth. Consumption equals development, and consumption-led growth will have a multiplier effect across sectors.

The Budget should also include:

• Growth-oriented policies
• Simplified regulations
• Skill development initiatives
• Rationalised and simplified GST norms

to enhance ease of doing business in retail.

1. Provide Low-Cost Finance to Retailers

Retailers, especially MSMEs and independent traders, face high borrowing costs.

RAI recommends:

• A special budgetary announcement for lower-interest financing for retailers
• Creation of a dedicated retail/trader finance scheme through SIDBI
• Allocation of a special fund for retail MSMEs
• Relaxation of select lending norms to improve credit access

This will support millions of small retailers across the country.

III. Encourage Innovative and Convenient Digital Payment Methods

Digital payments, especially UPI, have transformed retail transactions, witnessing over 650% growth in semi-urban and rural India.

To further accelerate adoption:

• Support innovation in digital payment technologies
• Promote easy, low-cost digital payment methods
• Waive MDR on debit card transactions

This will reduce cash dependency, improve efficiency, and strengthen transparency.

1. Consider Retail as an Essential Service

The Food & Beverage (F&B) retail sector should be recognised as a priority and essential service.

RAI recommends:

• Preferential land rates
• Subsidies on utilities such as electricity
• Policy support similar to other essential services

This will strengthen food security, employment, and consumer access.

1. Expedite National Retail Policy to Enable Ease of Doing Business

RAI urges the Government to expedite the formulation and implementation of the National Retail Policy.

A unified policy framework will:

• Reduce regulatory complexity
• Improve ease of doing business
• Encourage investment
• Support both modern and traditional retail

1. Extend All MSME Benefits to Retail Traders

While retail and wholesale trades are included under MSMEs and allowed Udyam registration, benefits are currently limited to Priority Sector Lending.

RAI recommends that:

• Retail and wholesale MSMEs be made eligible for all MSME benefits, at par with other sectors

VII. E-Enablement of MSME Retailers

Modernisation of retail begins with technology adoption, especially Point of Sale (POS) systems.

Benefits of POS adoption include:

1. Improved managerial control and reduced pilferage
2. Real-time sales and inventory management
3. Customer data capture and CRM
4. Transparent billing and consumer accountability

RAI recommends:

• Subsidised or reimbursed POS systems for small retailers
• Certification of secure, compliant POS hardware and software
• Built-in accounting standards and audit trails

VIII. Model Shops & Establishments Act

The Model Shops & Establishments Act, 2016 is a progressive reform allowing 24×7 operations, boosting employment and consumer convenience.

While states like Maharashtra and Gujarat have aligned their laws, RAI urges:

• Incentivisation and encouragement for other states to adopt the Model Act

Additionally, retailers should be supported with:

• Free/subsidised EDC machines
• Assurance that cost of digital payments does not exceed cash handling cost

An initial rollout of 25 lakh EDC machines can significantly boost GST registration and formalisation.

 EPCG Scheme for Retail Sector

RAI recommends reintroduction of the EPCG Scheme for the Retail Sector to support modern infrastructure creation.

• Extend concessional duty benefits under EPCG
• Applicable to import of capital goods
• Eligible retailers to have a minimum area of 1,000 sq. metres

Conclusion

With targeted policy interventions, the retail sector can significantly accelerate economic growth, employment generation, consumption, and formalisation. RAI looks forward to working closely with the Government to unlock the full potential of India’s retail ecosystem.