Here’s how the industry stalwarts react to the Budget 2020
At a time, when consumer spending is dipping, lack of a revival plan in the budget presented on Saturday by Finance Minister Nirmala Sitharaman has left retail, FMCG and apparel industry disappointed. According to Rajesh Ramakrishnan, MD, Perfetti Van Melle India, even as the income tax reduction might help with the purchasing power, it will still not be of much help to the FMCG sector “The income tax reduction could be seen as an indirect measure to increasing the purchasing power of the lower and middle-income groups. The trickle downflow of the same into the FMCG sector is something to be hoped for. The Union Budget, however, leaves the entire sector wanting more in terms of the revival of consumption,” he said.
The Indian FMCG market clocked a value growth of 7.3% in Q3’2019 (down from 16.2% in Q3’2018), according to market research firm Nielsen’s latest report. The growth trend continued to be dampened by the drop in consumption which has moved to 3.9% in Q3’2019 (down from 13.2% in Q3’2018). “While price-led growth is sustained at 3.4% this quarter. The sentiments echo those in India’s economic environment with GDP also witnessing the fifth straight quarter of downside. The drop in GDP is driven by the weakening of household spending which forms the majority share of the GDP for the country,” the report stated.
Interestingly, both retail and consumer goods firms have seen a drop in sales. Not to mention, the tough competition by e-tailers has been a double whammy. “The industry had requested the government to bring in measures that would grow demand and spur consumption. However, besides a few changes to the personal income tax rates, not much is seen impacting the demand and consumption story. The big gun announcements that the industry was expecting to stimulate the economy were missing,” Sanjay Vakharia, CEO, Spykar Lifestyle, said.
The industry is now waiting for the government to make alterations in the goods and service tax, largely reducing the taxation incase of white goods, among others. “In the white goods category GST on products such as refrigerator, air-conditioners is still 28%. The change would be if this is reduced, which will further lead to an increase in sales,” Nilesh Gupta, MD, Vijay Sales, said.
The overall retail market is expected to reach $ 1.2 trillion in value by 2021, while e-commerce sales will increase at a CAGR of 32 percent between 2017 and 2021 to reach a value of more than $80 billion, as per Deloitte’s report called, ‘ Evolve for Consumers’. The report further stated that rural India accounts for 40%−45% of FMCG sales. The number of online shoppers is expected to increase from the current 15% of the online population to 50% by 2026. As per, Ramesh Kaushik, VP, brand experience, Blackberrys, the industry expects more measures specific to the retail industry from the government in the future that will give the right impetus to the industry.