As February 29 is coming nearer, the Budget bet is getting bolder. Can Finance Minister Arun Jaitley reverse the tide of slowing private capex and spur economic growth?
Speaking to Bloomberg TV India , Nestle India Chairman and Managing Director Suresh Narayanan says the FMCG industry is looking to a set of investor-friendly policies and a transparent regulatory regime. Budget steps to support rural incomes and consumption will ultimately translate into more demand and capacity addition.
I believe that the Make in India initiative is clearly India’s most important globally orchestrated initiative to get people to look India as an attractive destination for manufacturing. Nestle’s participation in the Make in India exhibition has been whole hearted and this is been an opportunity for us to showcase our involvement over a 100-year history in India in manufacturing, in the development of supplier communities, in the development of societies and communities around our factories. We have eight factories today — starting with the first factory in Moga in 1961 and ending with our last factory in Tahliwal. What we really wanted to showcase was manufacturing, research and development, food quality and safety, and Nestle in society.
What’s your expectation from the Budget?
Like every manufacturer, I believe that in the food processing industry, there are very clear opportunities for manufacturing and creation of jobs. In fact, it is one sector where I strongly believe that India can leverage its might even more. And towards that, what our expectations are a more (investor) friendly set of policies as far as promotion of some of the product categories are concerned, and also enabling measures, which is not really Budget-related, but which will help the industry in terms of a greater initiative to make the regulatory framework more transparent and clear. I think good work has already started and I wish to commend the government for that. But, I am sure there is more in the coming future. What they can do to make it clear and make it more transparent: some of our regulatory policies, especially with regards to food quality and food safety, which can help manufacturers make better products and more investments in the country.
Nestle is largely an urban-based company. But, I want to understand your assessment of the rural demand right now. Should the government give more attention to rural spending? How is the rural environment really looking like?
As far as Nestle is concerned, I want to emphasise that the nature of our products, the kind of categories in which we are operating in, and the kind of value relationships and price relationships that we are enjoying in the market place, makes us more biased towards urban markets. So, we really are more of an urban-centric company in terms of the going middle class, growing aspirations and the improving lifestyles. So, I am afraid I have less of an insight on the rural consumption per se or categories that Nestle participates in. However, I think from an overall development of the FMCG segment, it is clear that the results are also showing some kind of softening because of the softening rural demand. And, I do hope any measure that is taken to support rural incomes and rural consumption will ultimately translate into more demand, greater capacities being added and making a greater success of this very worthy initiative of Make In India.
From the industry point of view, the GDP numbers, especially consumption expenditure, is closely watched by the FMCG industry. The number is not looking really impressive. What is the reality of this?
An interesting study on FMCG under the aegis of CII and BCG showed that the correlation between overall GDP growth and the growth of the FMCG sector, in terms of organic growth, is quite weak. As far as companies are concerned in the FMCG space, a lot is determined by the competitiveness of your offering — the newness of what you are able to offer, the price-value relationship, route-to-market and harnessing multiple channels of consumption. For Nestle, I see scope for greater engagement in the urban place and coming up with new categories to indulge and engage the consumer as we go forward.