India’s restaurant sector holds tremendous potential to generate significant employment in the coming years. According to the Vice President of the National Restaurant Association of India (NRAI), Mr. Zorawar Kalra, the industry can create up to 15 million jobs by 2028, a substantial rise from the current 8.5 million. However, this growth hinges on the government’s support and regulatory reforms aimed at addressing key challenges within the sector.

Key Factors Driving Job Creation in the Restaurant Sector:

India’s restaurant industry has been a critical driver of employment and economic activity. With over five lakh restaurants across the country, the sector is already one of the largest employers in the service industry. However, according to the NRAI, the restaurant industry’s full potential has not yet been realized, primarily due to regulatory and structural hurdles that limit its growth. Mr. Kalra emphasized that, with the right policy support, the sector can not only create millions of jobs but can also contribute significantly to India’s GDP.

Policy Demands for Job Creation:

A critical demand from the NRAI is to grant the restaurant sector ‘industry’ status, which would provide several benefits, including access to input tax credit (ITC) under the Goods and Services Tax (GST) framework. Currently, restaurants are taxed at 5% GST without ITC or 18% with ITC, which the NRAI finds restrictive and burdensome. The inability to claim ITC increases the operational costs for restaurants, making it difficult to pass on savings to consumers or reinvest in business growth. This, in turn, limits the industry's ability to expand and create more employment opportunities.

The NRAI has been actively discussing this issue with the government, seeking to revise the current GST structure. Mr. Kalra, who also heads Massive Restaurants Pvt. Ltd, expressed optimism that the issue would be resolved soon. He believes that granting the restaurant sector ‘industry’ status and allowing ITC would provide the necessary impetus for growth and job creation.

Challenges with Food Delivery Aggregators:

Another major challenge that the NRAI faces is its ongoing tensions with food delivery aggregators like Swiggy and Zomato. These platforms have been increasingly entering the quick-commerce space by launching private-label brands, which the NRAI claims undermines fair competition within the restaurant industry. Mr. Kalra called for a greater dialogue between food delivery aggregators and restaurants to ensure a more balanced and mutually beneficial relationship.

The NRAI has repeatedly pointed out that these platforms, which act as intermediaries between restaurants and customers, need to understand the challenges faced by restaurants, particularly smaller and independent businesses. Mr. Kalra stressed that while these platforms have helped expand customer reach for many restaurants, their growing influence on pricing and competition remains a significant concern.

Service Charge Debate:

The issue of service charge in restaurants has been a point of contention and remains subjudice. A hearing is scheduled for May 9, 2025, in the Delhi High Court to address the legality of the service charge levy. Although the matter is still under review, Mr. Kalra reiterated that the service charge is globally accepted and remains optional for consumers. He believes that the restaurant sector’s ability to charge service fees is an essential part of their business model and should not be restricted by overly stringent regulations.

Looking Ahead:

With continued policy support, the restaurant sector has the potential to drive job creation on a massive scale. The NRAI’s call for regulatory reforms, including industry recognition and GST ITC eligibility, could significantly reduce the operational burden on restaurants, allowing them to thrive and expand.

Mr. Kalra’s optimistic view of the sector's future suggests that the restaurant industry can become a cornerstone of India's economic growth. As the demand for dining experiences continues to grow across urban and rural India, this sector has the potential to become a key driver of job creation, particularly for the youth and in emerging markets.

In conclusion, the NRAI’s push for policy reforms and a more equitable relationship with aggregators is critical for the restaurant sector’s growth. With the right support, the industry can not only contribute to job creation but also play an instrumental role in India’s economic development in the years to come.

The Upcoming IPOs in this week and coming weeks are Wagons Learning, Srigee DLM, Manoj Jewellers.

The Current active IPO are Kenrik Industries, Arunaya Organics.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.