Key to revive consumer demand hidden deep inside Budget 2019

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July 17, 2019 4:27 PM

Schemes such as MUDRA can help bolster consumption slowdown by increasing the disposable income level among people, Nielsen India said.

It is no surprise that the investment in India by single-brand retailers over the last five or six years is negligible. (Reuters File photo)(Reuters File photo)

The government may not have directly addressed an ongoing slowdown in consumer demand, but proposed budget expenditure on social welfare, including Prime Minister Narendra Modi’s pet schemes, may still hold the key to revive the demand, British research firm Nielsen said. Schemes such as MUDRA can help bolster consumption slowdown by increasing the disposable income level among people, Nielsen India said in its FMCG growth snapshot for April-June 2019 quarter. Further, “full tax rebate for an income up to Rs 5 lakh, an increase to the tune of 10% in the outlay earmarked for MGNREGA from Rs 55000 crore to Rs 60000 crore, 8 crore free LPG connections,” could be key aspects in boosting disposable income, Nielsen report said.

Also Read: More companies quitting FMCG business rather than entering; half of slowdown due to SME growth slump

In the FMCG outlook, Nielsen India said that there are other schemes as well that can help contain depleting income levels among people. Rs 1 lakh loan under Mudra scheme for every woman in self-help group, allowing 100 per cent FDI in the cash and carry segment and in single-brand retail, and promoting the start-up ecosystem and MSMEs (Micro, Small and Medium Enterprises) may also help. The government has also said that it will invest in agri-infrastructure and water security. This would provide long term benefit but will take some time to show results, Nielsen India said.

How does income level affect demand?
Veteran analyst on consumer economy Rama Bijapurkar had recently proposed cash handouts instead of tax reductions. This could ease the consumer slowdown crisis in the country, she had said in an interview to CNBC TV18, adding that people spend more when they have more.

Outlook for demand slowdown
The FMCG industry is headed towards a slowdown, the India subsidiary of Nielsen Holdings said. The same is expected to stem from rural growth which is slowing down at double the rate of urban. In fact, the traditional growth driving segment for FMCG sales — rural India — is witnessing sales at a similar scale as urban. The Nielsen report also said that the slowdown is concentrated in several regions like Haryana, Madhya Pradesh, Uttar Pradesh, Maharashtra and Assam.

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