Finance minister Arun Jaitley’s largesse for rural areas, what with a total allocation of Rs 1,87,223 crore (24% more funds in the next fiscal) for rural, agriculture and allied sectors for FY18, the highest ever by any government, is sure to give a substantial push to the purchasing power of people in rural areas. With allocation for MNREGA also increased to Rs 48,000 crore, and tax exemption to professionals earning less than or up to Rs 5 lakh per annum, those in villages and small towns only stand to gain financially.
ITC chairman YC Deveshwar said the proposals to increase spends in rural areas and agricultural sector, infrastructure development and poverty alleviation should provide growth impetus to the domestic economy and a pick-up in consumption demand.
Agreed Sunil Duggal, CEO, Dabur India: “The Budget is consumption-focused and will help drive consumerism. A heightened focus on rural India with higher allocation for MNREGA and increased spending on infrastructure would go a long way in improving consumer sentiments in the hinterland.”
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The sale of both FMCG goods and two-wheelers, especially motorcycles, had registered substantial decrease in volumes in the past three months due to demonetisation. However, market experts said announcements in the Budget will provide much-needed fillip to these two segments by reviving the demand scenario in rural markets.
In motorcycles, market leader Hero MotoCorp will benefit the most, as 60% of its total volume comes from the rural market. Bajaj, too, with its offerings like CT 100 and Platina Electric, will look to benefit from any recovery in demand. “Tax rate reduction for income less than R5 lakh will boost consumer spend in India and drive sentiments, which will play a greater role in enhancing the economic growth of the country for FY18,” said Shekar Viswanathan, vice-chairman and whole-time director, Toyota Kirloskar Motor. Additionally, the second-hand car market is also headed for better times. “The income tax rate cut for individual tax payers earning under R5 lakh per annum will create a positive sentiment among likely first-time buyers for entry level and small cars,” said Guillaume Sicard, president, Nissan India Operations.