homeretail NewsBudget 2019: FMCG companies cheer rural spending, consumption boost

Budget 2019: FMCG companies cheer rural spending, consumption boost

Budget 2019: FMCG companies cheer rural spending, consumption boost
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By Priya Sheth  Feb 2, 2019 8:53:16 AM IST (Updated)

The government on Friday announced a slew of reforms for the rural India, which is likely to provide the much needed thrust to the fast moving consumer good companies.

The government on Friday announced a slew of reforms for the rural India, which is likely to provide the much needed thrust to the fast moving consumer good companies.

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Finance Minister Piyush Goyal, in his interim Budget 2019 speech, announced the Prime Minister Kisaan Samman Nidhi scheme. Through the scheme, farmers holding up to 2 hectare of land will be given Rs 6,000 per annum via direct income support. The money will be transferred in three equal installments of Rs 2,000 each.
The FMCG and retail industry see this as a positive development in the short to medium term as it will bring more money in the hands of the consumers. Industry players are terming this as a "consumption oriented" Budget.
“Overall, this is a 'consumption first' budget that will provide a much-needed thrust to growth in the FMCG sector. It re-emphasises the aam aadmi at the heart of the Government’s pro-growth, pro-reform agenda," Vivek Gambhir, managing director and CEO of Godrej Consumer Products said.
Sunil Duggal, CEO of Dabur, echoed similar views.
"Not only does he promise to put more disposal income in the pockets of Middle-Class India, he is also seeking to improve the quality of life of people at the bottom of the pyramid, particularly the small and marginal farmers, and unorganized sector workers. In short, it a great Budget for that should spur consumption,” said Duggal.
Demonetisation as well as the implementation of GST hurt the spending power of the middle class as well as the rural sector in the last two years, according to market experts.
Weak macroeconomic indicators have furthur compounded their worries. Insufficient rainfall in some pockets and sluggish wage growth have negatively impacted growth in rural areas in the last couple of years.
About 65 percent of Indians live in villages and small towns. This demographic, the biggest market for India’s consumer companies, is now dependent on the government’s generosity for a sustained demand recovery.
The government’s focus on rural reforms will help uplift the prospects of the retail industry and boost the overall spending levels. Initiatives like MGNREGA, PMGSY, focus on electrification of villages will also play a role in development of infrastructure and raise the standard of living in rural India.
“The Interim Budget proposals should augur well for the Indian economy by providing a growth impetus through a boost in consumption as well as an inclusive framework designed to benefit agri and rural communities, unorganised sector workers as well the middle class," said Sanjiv Puri, Managing Director, ITC.
Marico MD Saugata Gupta sees today’s Budget as a positive for the industry, as it will result in "more income for marginal and small farmers and more money to middle class to boost FMCG consumption”.
The government also raised the personal income tax slab limit to Rs 5 lakh from current Rs 2.5 lakh and raised the standard deduction for salaried employees.
"This will increase disposable income for middle and salaried classes and drive demand for mass products,” said Gambhir from Godrej Consumer Products.
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