Budget 2016: Reviving rural demand

Published: March 1, 2016 12:26:42 AM

Agricultural reforms, rural electrification, social sector reforms and allowing shops to remain open seven days a week are welcome initiatives which will boost economic growth

By Adi Godrej, Chairman, Godrej Group

Considering the difficult global situation and the stress of two consecutive bad monsoon rains in India, finance minister Arun Jaitley has delivered reasonable Budget proposals. The best feature of the Budget was sticking to the fiscal deficit figure of 3.5% of GDP. Kudos to the minister for this.

The proposals for agricultural reforms, rural electrification, social sector reforms, allowing shops to remain open seven days a week, etc, are extremely welcome and will add to economic growth.

The provisions in the real estate sector for affordable housing, housing finance deduction, rental income and elimination of dividend distribution tax on real estate investment trusts (REITS) will be beneficial.

To my mind, the additional personal tax on dividends above the Rs 10 lakh limit may lead to lower investment in the long-term stock market, as high rates of taxes have always, in the past, led to lower investment and growth.

Further focus on rural India will drive the overall growth of the economy, while it would significantly help in the revival of the FMCG sector.

The country has witnessed two consecutive poor monsoon rains, which had resulted in lower agricultural yield, leaving little disposable income in the hands of rural consumers.

Going ahead, not only will the FMCG sector benefit out of the growth in rural economy, but also our company Godrej Agrovet in particular—which is into animal feed business—would benefit immensely by the announcements made by the government in the Union Budget FY17.

The government’s focus on improving the financial health of the people in rural India—especially the farmers—would result in higher disposable incomes in their hands, which would result in reviving rural demand.

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