How to fix rural distress? One profound answer for Modi govt 2.0: Dabur CFO EXCLUSIVE

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Published: May 24, 2019 7:25:18 PM

With many FMCG players witnessing a slowdown in their latest quarterly sales, rural distress is the talk point of experts who attribute the slowdown to the ongoing agrarian distress.

Dabur is among the companies which were hit by the rural slowdown.

The ongoing rural distress, which seems to have claimed an unlikely victim in sluggish consumer staples sales of India’s top FMCG companies, may have an obvious solution, but a rather profound one — more jobs. With many FMCG players witnessing a slowdown in their latest quarterly sales, rural distress is the talk point of experts who attribute the slowdown to the ongoing agrarian distress. One of the key reforms needed to tackle this remains job creation, say, industry leaders and experts. People spend money only when they have it or if they have secure jobs, veteran consumer sector expert Rama Bijapurkar said in a recent TV interview.

A major FMCG company executive concurred that job creation is one of the preferred measures to revive the rural economy. “The new government should focus on overall economic development and employment creation, which would go a long way in accelerating consumer demand and improving overall GDP growth,” Dabur India Ltd Chief Financial Officer Lalit Malik told Financial Express Online. Further, the government must also ensure that fiscal incentives reach the pockets of rural consumers, he added. This would improve their purchasing power and boost consumerism, particularly for branded consumer products, Lalit Malik said.

It was GST and demonetisation that hurt MSMEs (micro, small and medium enterprises) which employ about 120 million people, Vinita Bali, former MD of Britannia, said in a recent TV interview. The contraction in job creation has been caused by this, along with other reasons, she added.

In the past quarter, companies such as Patanjali, HUL, Britannia, Dabur and ITC, have acknowledged slowdown in consumer demand. Several reasons were given for the same including prolonged winters and rural distress. In fact, companies such as Dabur and Britannia lamented their inability to touch double-digit growth in Jan-Mar quarter with Britannia saying that the favourable monsoon and stable government post-Lok Sabha 2019 elections will ease down the slowdown.

Among other major recommendations to lift the spirits of the FMCG sector from a rare slowdown it is in right now, Lalit Malik suggests easing the tax burden on companies. “There is also an urgent need to help Corporate India by balancing between reduction in tax rates and providing incentives. The improved profits would be ploughed back into acceleration production and industrial growth,” Dabur CFO Lalit Malik told Financial Express Online.

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