Will Union Budget 2025 accelerate retail's digital transformation?

The rapid growth of technology is reshaping the Indian retail industry. As digital and traditional retailers continue to evolve, it’s becoming increasingly important to bridge the gap between the two to mold a stronger connection with customers. A recent study by Statista predicts that India’s retail market will reach an impressive US$1.7 trillion by 2026, a significant leap from 2020. This growth signals the ongoing convergence of retail and technology, a shift that is redefining the industry.

As technological change accelerates, the Union Budget for 2025-26 presents a paramount opportunity to fast-track this digital transformation. What the industry is looking for are reforms that not only build on existing policies but also introduce new initiatives to facilitate wider technology adoption.

Building on India’s Digital Public Infrastructure (DPI) success

India has already demonstrated global leadership in Digital Public Infrastructure (DPI), with initiatives like Aadhaar, UPI and e-governance platforms revolutionizing how businesses and consumers interact. By building on DPI’s success, the retail industry can enable broader consumer reach, especially in rural areas. Leveraging UPI and digital payments can facilitate a seamless shopping experience across online, in-store and mobile channels.

Retailers can leverage consumer data to offer personalised promotions and product recommendations. By integrating digital tools, supply chains can be optimised for better inventory management and logistics efficiency. DPI empowers micro-entrepreneurs by enabling small retailers to adopt digital payments and access capital.

Furthermore, leveraging DPI’s secure transaction protocols enhances consumer trust, while integrating sustainability practices aligns with growing eco-conscious consumer preferences.

Fuelling the Digital Retail Revolution in India

In the upcoming budget 2025-26, measures like the introduction of the National Retail Trade Policy, easier financing for small retailers, strengthened support for digital infrastructure and e-commerce and an expansion of the Production-Linked Incentive (PLI) scheme for consumer goods will drive retail sector growth and digital transformation.

These initiatives will help improve the online presence and scalability of businesses across diverse sectors, including textiles, footwear, consumer durables, and more.

Addressing Inverted Duty Structures and Tariff Rationalization

Indian retailers struggle with inverted duty structures, where input taxes exceed final product taxes, leading to operational inefficiencies and higher costs. The retail industry requires both inverted duty structure adjustments and tariff rate simplifications to achieve growth and technological advancement.

By rationalising tariffs, the government can create a more balanced taxation system that reduces input costs and fostering local manufacturing. This will also promote domestic and online retail growth, improved ease of doing business and increased global competitiveness.

The budget must simplify the tax system, align tariffs, and provide targeted incentives for certain sectors to boost retail growth while fostering a more sustainable economic environment.

Simplifying customs compliance for retail growth

The Union Budget 2025-26 should promote digital transformation in customs, focusing on API integration, streamlined data filing and easier access to the ICEGATE portal. Additionally, introducing an amnesty scheme under customs law, like past models could resolve pending litigation.

Implementing an online module for BoE amendments and duty payments will ease business operations. Updating the MOOWR 2019 framework with streamlined clearance processes and periodic customs duty payments will strengthen the Make in India initiative, benefiting the retail industry.

Promoting omnichannel retailing

Omnichannel retail is now essential because customers expect seamless shopping experiences across channels. The Omnichannel Retail Commerce Platform market will expand from USD 6.39 billion in 2024 to $26.06 billion by 2032, according to Market Research Future ’s analysis. Budget incentives should encourage retailers to unite their digital strategies with brick-and-mortar operations while using data analytics to gain stronger customer understanding.

Incentivising adoption of retail technologies

The upcoming budget 2025-26 needs to provide incentives for adopting innovative retail technologies, enhancing customer experiences and operational efficiency. AI, big data analytics, mobile apps and IoT technologies, have the power to transform supply chains and enable personalized customer interactions.

India’s pursuit of a $7 trillion economy by 2030 hinges on retail sector development, driving economic expansion and job creation. The 2025-26 Budget must introduce visionary policies to position India as a global leader in retail innovation and digitalisation.

The author is Co-Founder and CEO of Showroom B2B. Views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect Firstpost’s views.