Union Budget 2025 sets a strong Stage for retail growth with tax relief, ease of doing business and gig worker protections, writes Kumar Rajagopalan
Retail has long been a key driver of India’s economy, contributing 10 per cent to the gross domestic product (GDP) and employing 50 million people. With the market projected to touch USD two trillion by 2032, the sector’s success depends on policies that support consumption, improve ease of doing business, and strengthen micro, small and medium enterprises (MSMEs).
The Union Budget introduced several measures that supported the retail industry. From income tax relief and financial support for MSMEs to regulatory simplifications and gig worker inclusion, the announcements provided a much-needed push for growth.
More Disposable Income, More Spending:
The biggest takeaway from the budget was the increase in the income tax exemption limit to Rs 12 lakh, offering much-needed relief for retailers who had witnessed reduced consumer spending last year. Inflation and stagnant income growth had led to cautious spending patterns, impacting retail demand. With this tax adjustment, middle and lower-middle-class consumers—who form the backbone of India’s consumers—have more disposable income. This creates a stronger demand cycle across essential and discretionary categories like fashion, electronics, home goods, and personal care.
These tax changes provided a timely boost, improving consumer sentiment and encouraging higher discretionary spending. Given that consumption accounts for more than half of India’s GDP, this policy change is expected to stabilise demand and drive stronger, sustained growth in the months ahead.
MSME Support Driving Retail Growth:
MSMEs have long been the foundation of India’s retail supply chain, and the budget introduced key measures to help them scale and sustain operations. The new Fund of Funds for Startups, with an additional Rs 10,000 crore, injected capital into emerging businesses, allowing them to develop new products and expand their reach.
The expansion of the credit guarantee scheme made it easier for small and medium-sized retailers to secure funding without excessive financial hurdles. Another critical initiative was the introduction of customised credit cards for Udyam-registered micro enterprises, offering smoother access to working capital for small retailers.
A major reform was the increase in MSME classification limits, with investment thresholds raised by 2.5 times and turnover limits doubled. This allows more businesses to qualify for MSME benefits, giving them access to cheaper credit, government incentives, and support schemes. Small retailers, who have long faced financial constraints, are now better positioned to expand operations, invest in technology, and compete more effectively in an evolving retail landscape.
Simplifying Business Operations:
Navigating complex regulations has been one of the biggest challenges for retailers. The budget addressed this by introducing a regulatory committee for non-financial regulations, aimed at simplifying compliance requirements and reducing bureaucratic hurdles. The Jan Vishwas Bill, which decriminalised minor business offences, also helped retailers focus on growth instead of legal complexities.
At the state level, efforts to streamline licensing, approvals, and business laws have created a more efficient and transparent environment for retail expansion. Additionally, the modernisation of land records enabled retailers to develop infrastructure and expand operations more seamlessly.
With these reforms, the business climate for retailers is expected to become more predictable and less restrictive, allowing both large and small players to operate with greater confidence.
Recognising Gig Workers In Retail:
The retail industry has been undergoing a rapid transformation, with gig workers playing a crucial role in logistics, deliveries, and e-commerce fulfilment. The budget formally recognised their contributions by introducing identity cards for gig workers through the e-Shram portal, granting them official recognition and access to social security benefits.
One of the most impactful announcements was the provision of health cover for one crore gig workers, ensuring financial security and basic protections for those employed in delivery services, warehousing, and on-demand retail jobs. These steps have strengthened the omnichannel retail ecosystem, helping retailers build a more stable and structured workforce to support both online and offline retail operations.
Sector-specific Growth Opportunities:
Certain retail-driven industries received targeted support in the budget. The Focus Product Scheme for Non-Leather Footwear was expected to generate 22 lakh jobs, providing a boost to both domestic production and exports. Similarly, the initiative to position India as a global hub for toys created new opportunities for manufacturers and retailers, strengthening India’s role in the global supply chain.
Incentives for electronics and leather industries further reinforced domestic manufacturing, helping reduce import dependency and stabilise pricing for retailers. These measures ensured that businesses could access better-quality locally produced goods, enhancing the overall resilience of the retail supply chain.
Creating A More Inclusive Workforce:
Women’s participation in retail has been steadily growing, and the budget took steps to make the workplace more inclusive. The introduction of working women’s hostels and crèches in collaboration with industry addressed a critical need, making it easier for women to balance work and family responsibilities.
Additionally, the government allocated funds for women’s entrepreneurship and employment programmes, creating more opportunities for women in retail, merchandising, and business ownership. By ensuring greater workforce participation, these initiatives helped expand talent pools, increase diversity, and drive innovation in retail.
Retail’s Path Forward:
The Union Budget 2025 has laid a strong foundation for retail growth, focusing on tax relief, MSME support, ease of doing business, and gig worker protections. With effective implementation and continued regulatory improvements, India’s retail industry is well-positioned to drive consumption, create jobs, and contribute to sustained economic growth in the months ahead.
Note- The author, Kumar Rajagopalan is the Chief Executive Officer (CEO) of Retailers Association of India. The views expressed in this article are those of the author and do not necessarily reflect the views of the publication.
