The past few quarters have seen rural demand grow ahead of urban India, and these measures will further fuel this growth.
FINANCE MINISTER Piyush Goyal’s Interim Budget 2019 can be summed up as a series of announcements that seek to infuse josh in the consuming class, both in India and Bharat, much on the lines of the Bollywood movie Uri that he quoted often in his speech. Not only does it promise to put more disposal income in the pockets of middle-class Indians, it also seeks to improve the quality of life of people at the bottom of the pyramid such as small and marginal farmers and unorganised sector workers. It is, undoubtedly, a great Budget for consumption.
With the higher budgetary allocation under MNREGA, proposed spends on rural road network, increased interest subvention scheme for distressed farmers and the modest farm support scheme offering income support for marginal farmers, the Budget ticks all the right boxes when it comes to fueling the rural and agrarian economy. The minister also announced a social security coverage for workers in the unorganised sector, providing them an assured monthly pension of Rs3,000, besides an increase in tax-free gratuity limit. These are certainly steps in the right direction and would go a long way in improving their quality of life and also boost consumption by putting more money in their pockets. The measures would also help bring a lot of households in the consumption class, and rural demand is expected to accelerate further.
The past few quarters have seen rural demand grow ahead of urban India, and these measures will further fuel this growth. Dabur has been betting on the rural economy and we have been investing in expanding our rural footprint and strengthening our rural distribution muscle to take advantage of this demand growth. We would see this initiative gather pace, going forward. We have already put in place plans to expand our rural reach to 52,000 villages over the next couple of years.
But the consuming class, or middle-class India, seems to have emerged as the biggest beneficiary of this year’s Budget. The government decision to exempt income tax on individuals with income of up to Rs5 lakh and an increase in standard deduction to Rs50,000 to the salaried class are big pluses.
The hike in tax deducted at source (TDS) threshold on rent paid by non-individuals and relaxation of long term capital gains tax exemption norms under Section 54 to cover purchase of two houses are the other big-ticket reliefs announced for the aam aadmi. With such populist measures, I am confident this Interim Budget would boost overall consumer confidence and play the role of a catalyst for demand generation for branded consumer staples and consumer products. The income-tax cuts would lead to higher spends on discretionary items.
What’s also heartening to see is that the government is committed to long-term reforms, and is focused on positioning the economy for future sustainable growth while simultaneously addressing a changing international tax landscape. The decision to process income tax returns within 24 hours and ensure payment of refunds immediately, in addition to almost all assessment and verification of income tax returns being done electronically by an anonymised tax system without any intervention by officials within the next two years will surely create the foundation for a new-age India. The Interim Budget, I feel, has successfully laid down the blueprint for creating an enabling framework that would promote growth.
However, the upward revision in fiscal deficit target to 3.4% of GDP for 2018-19 and 2019-20 remains an area of concern. Also, there is not much clarity on the government vision and strategy for improving infrastructure and job creation.
-The author is CEO, Dabur India