Retail sales in May only 21% of pre-Covid levels, can recover fast if vaccination picks up, says RAI

RAI had in April requested Finance Minister Nirmala Sitharaman to extend the Emergency Credit Line Guarantee Scheme (ECLGS) 3.0 to retailers.

The MSME-dominated retail sector saw a contraction of 79 per cent in monthly sales in May vis-à-vis pre-Covid sales in May 2019 as the second wave of the pandemic forced retail businesses to hault operations, retail body Retailers Association of India (RAI) said on Tuesday. The decline followed near pre-Covid level recovery for the sector in February as retail sales had touched 93 per cent amid post-Covid 1.0 recovery during the month in comparison to the year-ago period. However, the second wave had severely impacted the recovery path.

“The May business has only been 21 per cent of May 2019 levels. To get this rectified, the only change this time from last year is the availability of vaccines. If vaccination drive picks up, things can recover really fast just like how it is happening in the US or the UK. But if it continues the way it is, recovery is expected to be delayed,” Kumar Rajagopalan, CEO, RAI told Financial Express Online.

A survey by the association for retail sector’s recovery during May showed that contraction in sales of food and grocery segments was much lower at 34 per cent in comparison to 86 per cent witnessed in footwear, 87 per cent in beauty, wellness & personal care, and 80 per cent in sports goods as compared to pre-covid sales in May 2019. Retailers across regions had reported a steep fall in sales. While Western and Northern regions each saw 83 per cent decline, Southern region witnessed 73 per cent fall and Eastern region reported 75 per cent decline.

“We had urged Piyush Goyal and other ministers to give respite to tobacco and wine retailers and operate under strict guidelines as the shutdown of such shops would also cost significant tax revenue loss to the government. While the Mudra loan scheme had supported them but after lockdown, there is no relief. Retailers are already at 98 per cent loss while around 30 per cent in Telangana might be shut,” Sallauddin Deccani, Vice President, Federation of Retailer Association of India (FRAI) Telangana Chapter had told Financial Express Online.

With a drop in the daily number of Covid cases across the country to less than a lakh, multiple state governments have started to ease Covid-related restrictions including complete lockdown, weekend lockdown, night curfew, etc. Delhi, Haryana, Tamil Nadu, Karnataka, Maharashtra, and more have eased local restrictions. “Many state governments have started opening up economy slightly. Hence sales in June would be better than May for sure but how much only time will tell. In many cases, stores are only open till 4 pm but peak business is between 5.30 pm and 8.30 pm,” added Gopalan.

RAI had in April requested Finance Minister Nirmala Sitharaman to extend the Emergency Credit Line Guarantee Scheme (ECLGS) 3.0 to retailers. Importantly, the expert Committee made under the chairmanship of K.V. Kamath had last year recommended financial ratios for 26 stressed sectors for loan restructuring including corporate retail outlets. RAI recommend that this be “clarified immediately and that ECLGS funds be made available to the retail sector.”

“If Finance Ministry extends the support, at least there is a possibility to come out of this. So, we will have to wait and watch. Last year food businesses were at about 90 per cent level, but this year it also got impacted as many modern retailers were asked to shut down. Overall, recovery depends on vaccination and chances of the third wave of Covid, so we cannot predict,” he added. RAI represents nearly 5 lakh retail stores.