Budget 2019 India: The government will ease local sourcing norms for FDI in single-brand retail sector.
By Shashwat Goenka
Budget 2019 India: It is a Budget for new India, and strongly built on the Interim Budget presented earlier this year. It has set the foundational tone for the country for the coming years. As finance minister Nirmala Sitharaman mentioned, we are in line to be a $5-trillion economy very soon, I don’t see why we should not achieve 7% GDP growth for 2019-20. In order to clock such high growth, the country’s economy, infrastructure and capital markets are starting to get ready.
Over the last five years, the government has done a lot to build these items. For example, on the infrastructure side, she spoke about how important connectivity is, and specifically said, “Connectivity is the lifeblood
While the government is putting a lot of emphasis on Sagarmala and Bharatmala projects with the dedicated freight corridor (DFC) to reduce logistics costs, it is also focusing on “One Nation, One Card” and “One Nation, One Grid.” These are strong points to build on the infrastructure. The finance minister mentioned that she would be creating a blueprint for developing gas grids, water grids, i-ways and regional airports. It will be revealed later this year. All these are relevant from infrastructure perspective.
On rural India, or Gramin Bharat, the minister talked about providing LPG connections and electricity to every household by 2020. That will go a long way in proving that the rural economy is equally, if not more, important as the urban economy. There are two other major things she spoke about for Bharat: zero-budget Farming and Har Ghar Jal (piped water supply).
All the benefits the minister spoke about for Bharat will boost rural demand significantly to spur overall consumption demand in the economy. In addition, from a tax perspective, after the proposed corporate tax reduction, a lot of companies will be able to invest a lot more money back into their businesses. So, their is no reason why demand will be slowing down—demand will go up quickly as a result of this Budget. We are seeing an uptick in demand over the last three months, and it is increasing month on month.
The government will also ease local sourcing norms for FDI in single-brand retail sector. It will benefit the retail sector hugely because there are a lot of single-brand retailers operating currently with large manufacturing sites outside the country, but they are unable to service a lot of parts of India because of the 30% local sourcing norms that were there. By easing that for single-brand retail, it will boost the retail economy.
The author is Sector head, Retail & FMCG, RP-Sanjiv Goenka Group