Empowering Retailers: A Call for Inclusive MSME Benefits and Accessible Financing

By Gaurav Marya, Chairman, Indian Small Business & Franchise Association (ISFA)

As we approach the Union Budget 2025-26, the retail sector stands at a pivotal juncture, eagerly anticipating policies that recognize its integral role in India's economic fabric. The ISFA, RAI and other retail trade associations has been at the forefront, advocating for the extension of Micro, Small, and Medium Enterprises (MSME) benefits to retailers and the introduction of low-cost financing schemes. These measures are not only essential for the growth and sustenance of the retail industry but also critical for strengthening India’s economy, which is heavily reliant on consumption-driven growth.

The government’s decision to recognize retail and wholesale trades as MSMEs, allowing their registration on the Udyam Registration Portal, was a commendable step forward. However, the benefits for these MSMEs have been predominantly limited to priority sector lending. This partial inclusion leaves a significant gap in the support ecosystem available to retailers, who face unique challenges in their operations.

To truly empower retailers, it is imperative that all MSME benefits, including access to government schemes, financial incentives, skill development programs, and infrastructure support, be extended to them. This inclusivity would enable small and medium retailers to modernize their businesses, adopt technology, and expand their footprints in both urban and rural markets. Such measures would have a cascading effect, contributing significantly to employment generation and fostering local entrepreneurship.

India’s retail sector accounts for nearly 10% of the GDP and employs over 40 million people, making it one of the largest contributors to the economy. Despite this, the sector often faces neglect in terms of policy support. Comprehensive inclusion in MSME schemes would not only acknowledge the sector’s contribution but also ensure its sustained growth amid rising competition from organized retail and e-commerce platforms.

Access to affordable credit remains one of the most pressing challenges for retailers, particularly small and independent ones. High-interest rates, coupled with stringent lending norms, often impede their growth and operational efficiency. Many retailers operate on thin margins and struggle to secure working capital to manage inventory, pay wages, or invest in business expansion. Recognizing this issue, ISFA, RAI & other trade retailer associations has proposed the allocation of a special fund and the formulation of a trader finance scheme in collaboration with the Small Industries Development Bank of India (SIDBI). Such initiatives could facilitate low-cost loans with relaxed guidelines, ensuring that even the smallest of retailers have access to formal credit channels. This is especially important in tier-2 and tier-3 cities, where informal lending practices are prevalent and often exploitative.

The success of these schemes would depend on their design and implementation. For instance, the government could consider introducing interest subvention schemes for retailers, similar to those offered to farmers or MSMEs in the manufacturing sector. Additionally, streamlining the application process for loans and reducing bureaucratic hurdles would encourage more retailers to seek formal financial assistance.

The pandemic underscored the resilience of India’s retail sector, which adapted quickly to changing consumer behaviors and market dynamics. Small retailers, in particular, played a crucial role in ensuring the availability of essential goods during lockdowns, often at great personal risk. This resilience, however, came at a cost, with many businesses suffering losses due to disruptions in supply chains and declining footfalls.

Supporting these businesses through inclusive policies and financial interventions is not just a matter of economic necessity but also a moral imperative. By extending comprehensive MSME benefits and facilitating access to low-cost financing, the government can ensure that the retail sector continues to thrive and contribute to the nation’s recovery and growth.

Finance Minister Nirmala Sitharaman, in her previous budget speeches, has emphasized the importance of supporting MSMEs, job creation, and economic recovery. The upcoming budget presents an opportune moment to translate this commitment into actionable policies for the retail sector. Aligning with the government’s broader objectives of promoting inclusive growth and fostering entrepreneurship, these recommendations for the retail industry deserve serious consideration.

Extending MSME benefits to retailers would complement the government’s efforts to formalize the economy and expand the tax base. It would also align with initiatives like the Digital India campaign, as many retailers are increasingly adopting digital payment systems and e-commerce platforms to cater to tech-savvy consumers.

The retail sector is not just a contributor to the economy but also a reflection of India’s diversity and entrepreneurial spirit. From the local kirana store to emerging direct-to-consumer brands, the sector embodies the aspirations of millions of Indians. The government’s support can unlock the sector’s true potential, enabling it to drive consumption, create jobs, and foster innovation. ISFA envisions a future where small format retailers can compete on a level playing field with larger organized players and international brands. Achieving this vision requires collaboration between industry stakeholders and policymakers. By addressing the sector’s challenges through targeted interventions, the government can ensure that retailers are not just participants but leaders in India’s growth story.

The retail sector’s significance in India’s economic landscape cannot be overstated. As the Chairman of ISFA, I urge the government to consider extending comprehensive MSME benefits and introducing low-cost financing schemes for retailers in the upcoming Union Budget. These measures will not only uplift the retail community but also contribute to the broader objective of inclusive and sustained economic development.

Retailers are the backbone of India’s consumption-driven economy. By empowering them, we empower India.