1. Budget 2016: Better times ahead for consumer goods industries

Budget 2016: Better times ahead for consumer goods industries

A potential big change can be the government’s decision to allow FDI in production and marketing of food products produced in India

By: | Updated: March 1, 2016 10:13 AM
Shop-consumer-Re The government has been consistent in its focus areas, which have been reiterated in the Budget once more through the nine pillars of transformation of India to a more efficient country to do business in, and more inclusive for its citizens. (Reuters)

While it is easy for some to feel disappointed at the lack of theatrics and so-called big-bang reformist fireworks in the Budget, there is enough reason to feel optimistic about the nation’s economy in general, and expect a noticeable boost in consumer spending in the future.

The government has been consistent in its focus areas, which have been reiterated in the Budget once more through the nine pillars of transformation of India to a more efficient country to do business in, and more inclusive for its citizens. The hike in government spending in various areas will steadily yield more visible results by way of better capacity utilisation of core industries such as steel and cement, capital goods producers, higher job creation, and improving the rural economy in particular. In the past three years, the Indian economy has not only faced several global headwinds that have led to contraction in exports (with the only silver lining being benign crude prices), but also three highly deficient monsoons that have severely stressed the rural economy. With increased public spending on rural infrastructure and specific schemes directed towards the rural and more marginalised populations, the only other boost the economy needs this year is a good monsoon, which can then stimulate rural demand in a big way and provide impetus not only to companies having a direct exposure to the rural sector, but also consumer products companies in general that can benefit from higher consumer incomes in rural India.

A potential big change can also be the government’s decision to allow FDI in production and marketing of food products produced in India, and creating e-trading platform for farm goods for the states (currently 12) that have agreed to repeal the APMC Act. While it is too early to say if this finally means opening of India’s food retail sector to foreign investment (DIPP should come out with a policy document shortly, clarifying the FM’s Budget announcement), this could benefit millions of farmers (by getting prices for their produce) and millions of Indian consumers (by paying lower prices at retail).

The FM has also promised to come up with a new shops and establishments Act that would, among other changes, provide all shopping areas and shops to remain open all days a week, and theoretically, 24 hours a day (subject to appropriate labour protection regulations). While it is up to specific states to adopt this Act, it is a step that would be welcomed by millions of independent shopkeepers, as well as shoppers, across the country.

On the whole, India should see stronger growth in private consumption in the next year.

  1. No Comments.

Go to Top