Consumption-led growth has been a major driving factor for GDP growth over the last decade and the Government has done many things through its budgets and its policies to enable this.

Sustained GDP increase, more jobs, safety nets such as MNREGA, higher budget deficits, regular hikes in MSP for agri-products – all have played a role in increasing the consumer's sense of well-being and that translates into more purchases of consumption goods.

But that has changed over the last few quarters. Negativity has started setting in, beginning with big-ticket items such as cars, and more recently with consumer goods. Consumers have started tightening their belts.

Will this budget change that? That is the question on the table.

The Finance Minister has stuck to his commitment to bring back fiscal discipline and is keen to reduce the fiscal deficit to 4.8 per cent in FY 2014. We have noticed some early indications of reducing inflationary pressures and I believe this budget will have a significant impact on inflation.

I particularly like the fact that a lot of revenue raising is being done through direct tax hikes and through sin tax increase (cigarettes), both unlikely to have a negative impact on demand.

This should encourage the RBI to reduce interest rates and increase money supply. Typically such macro-economic effects take time to work their way through – but over the next 3-4 quarters this should favourably impact sectors such as automobiles and white goods.

Low interest rates are a necessary condition for higher levels of investment and therefore higher GDP and job creation. But not sufficient – Japan is a classic case!

That requires government policies which promote asset productivity, infrastructure creation, opening up new sectors for private investment. The budget is a bit short on that and is also not the appropriate platform.

So I'm on the fence at this moment on whether this budget will drive GDP growth and this should be a concern for FMCG companies. They would surely find a silver lining, though, in the Government's continued support for social programmes such as MNREGA, food security, skills training, direct cash transfer, all of which should support consumption.

All in all a budget which is a mixed bag in the immediate future. But I still welcome it as a positive indication that India is returning to a path of sustainable growth - of the nation and of its consumer industries.

(Sitaram, a long-time consumer goods marketer, is Operating Partner, India Equity Partners, a private equity fund.)

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