Budget 2020: Rural push will spur demand for FMCG, say Dabur, Marico, Britannia in unison

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February 1, 2020 5:51 PM

Budget 2020-21: Though FMCG sector didn’t get a direct mention, it is expected that other announcements made by the finance minister, especially regarding the rural sector, will have an indirect impact on the fast-moving consumer goods sector.

FM Nirmala Sitharaman presented Budget 2020Union Budget India 2020: The government’s push towards agriculture, irrigation and rural development is also likely to fuel growth of rural economy which has been reeling under a slowdown

Union Budget 2020: FM Nirmala Sitharaman has finally made her Budget speech and though FMCG sector didn’t get a direct mention, it is expected that other announcements made by the finance minister, especially regarding the rural sector, will have an indirect impact on the fast-moving consumer goods sector. “The budget’s thrust on skilling, especially in the fields of automation and AI, should ultimately lead to creation of jobs and hence revival of demand,” Rajesh Ramakrishnan, Managing Director, Perfetti Van Melle India, told Financial Express Online. He added that the reduction in personal income tax could also act as an indirect measure to increase the purchasing power of the lower and middle-income groups. 

While Perfetti Van Melle, the maker of Alpenliebe brand of toffees, hopes to see the trickle-down effect of income tax reduction into the FMCG sector, it said that the Union Budget left the entire sector wanting more in terms of revival of consumption. FMCG industry in India has been reeling under a slowdown and the industry was expecting some big bang reforms to spur the demand and consumption. 

Several other FMCG leaders are of the opinion that the rural sector reforms could prove to be instrumental in spurring FMCG demand. “We are optimistic about the government’s rural agenda and hope that it buoys consumer demand for the FMCG sector,” Varun Berry, MD, Britannia Industries, said in a statement. The government’s push towards agriculture, irrigation and rural development is also likely to fuel growth of rural economy which has been reeling under a slowdown, Vivek Karve, CFO, Marico Limited, said in a statement on Saturday. “Reduced personal taxes auger well for consumer goods companies as more disposable income will help drive consumption of branded goods,” he added.

Similar thoughts were also echoed by Amrinder Singh, Director, Bonn Group of Industries. “Skill-development fund allocation by the government for the youth in the rural sector to provide jobs will enhance the rural sentiments and provide more opportunities for growth … higher rural income would help in picking up consumption,” he said. The government’s aim to double farmers’ income by 2022 is also likely to bring some change in FMCG companies’ growth. Further, the FM Nirmala Sitharaman’s announcement of cutting personal tax rates to spur consumption will likely pick up the shares of FMCG companies, he added. 

While today’s budget offers a chance of increasing purchasing power of Indian consumers, the government missed the mark on introducing big bang reforms. “The big bold steps needed to restart economic growth are missing. That said, the fact remains that the government had little room for manoeuvre,” Mohit Malhotra, CEO, Dabur India Ltd, said. Further, the cuts in income tax will put more money in the hands of lower income groups and this “would definitely put more disposable income in the pockets of the consuming class, particularly the middle class, which may help push demand for consumer staples,” he added. 

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