The government’s focus on overall increase in capex outlay and expansion of schemes, particularly for the economically-weaker groups, farmers and women, are expected to raise living standards and, in turn, boost rural consumption in the mid-to-long term. FMCG and consumer durable companies said the positive impact of some of these measures is likely to visible in 2-5 years.
Mayank Shah, Vice-President, Parle Products, said the government has done a balancing act with focus on fiscal prudence as well as an enhanced emphasis on welfare of the poor, women and farmers. “ This augurs well for the FMCG sector. These measures are expected to boost rural consumption in the mid to long term but not immediately. The significant rise in capital expenditure is expected to lead to more employment generation especially in rural regions,” he added.
The FMCG industry has been witnessing sluggish demand in the past few quarters with urban consumption outpacing rural demand.
Mohit Malhotra, CEO, Dabur India, pointed out that while the government didn’t pander to populist impulses, significant allocations were made for infrastructure development and incentives for rural housing, agriculture and fisheries. “The strategic decisions to enhance incentives for rural populace, particularly women, are expected to have a lasting positive impact, enhancing sentiments over the long term. These measures will go a long way in enhancing the quality of life in rural India thereby ensuring sustained demand for branded consumer goods,” he added.
The government’s emphasis on housing for the economically weaker section and deserving sections of the middle class is also likely to spur demand for consumer durables and electronics products. Kamal Nandi, Business Head and EVP, Godrej Appliances, pointed out benefits from increase in capex, solar energy scheme and housing scheme will boost sales for consumer durable industry in the next 3-5 year period.
“A significant boost is expected in the consumer electronics and durables industry with the creation of 20 million households through the rural housing scheme, reviving demand for products like LED TVs, washing machines and refrigerators,”said Sunil Vachani, President, CEAMA.
Anand Ramanathan, Partner and Consumer, Products and Retail Sector Leader at Deloitte said the prioritised housing, tourism and infrastructure spending will have a multiplier effect on consumption. “Focus on crop insurance and rooftop solar investments will help put more money in the hands of rural consumers along with employment generation opportunities in micro food processing and animal husbandry. Overall, the budget will benefit FMCG and consumer durable companies from a growth in rural consumption,” he added.
Naveen Malpani, Partner and FMCG & Consumer Goods Industry Leader, Grant Thornton Bharat said proposed increase in capex outlay is expected to assist in boosting rural consumption. “This will be complemented by growth programs in religious tourism, offering significant opportunities for local entrepreneurship. Investing in the future of food processing will also be pivotal for rural empowerment,” he added.
Paresh Parekh, Tax Partner-Consumer Products and Retail, EY said the Interim Budget presents a “ nuanced strategy” that recognizes the pivotal role of consumption in economic expansion.