FMCG Industry Welcomes Budget, Says Reduction in I-T Slabs to Drive Consumption

New Delhi: The FMCG industry, facing a consumption slowdown, on Saturday welcomed the Union Budget saying that proposed reduction in personal taxes would help drive consumption and the thrust on rural development would revive demand from the segment.

Companies like Godrej Consumer, Dabur, Britannia Industries, Marico and Jyothy Labs said the special thrust on agriculture, irrigation and rural development should fuel growth in a struggling rural economy, where FMCG growth has slowed down.

"The Union Budget attempts to activate multiple levers like rural, infrastructure, entrepreneurship and financial sectors to stimulate growth. It remains to be seen which of these will fire and to what extent. We are optimistic about the government's rural agenda and hope that it buoys consumer demand for the FMCG sector," Britannia Industries MD Varun Berry said.

Terming it as "incremental budget", Dabur India CEO Mohit Malhotra said the government continues to focus on farmers' income and is offering significant sops at the lower end of the spectrum, which will enhance the purchasing power of the consuming class.

"The big positive takeaways from this year's Budget would be the income-tax relief offered to lower income groups by slashing income tax rates and rejigging income tax slabs to reduce total tax payable by individuals. This would definitely put more disposable income in the pockets of the consuming class, particularly the middle class, which may help push demand for consumer staples," he said.

However, Malhotra added that "big bold steps" needed to restart economic growth are missing.

"That said, the fact remains that the government had little room for manoeuvre," he added.

According to Godrej Consumer Products MD and CEO Vivek Gambhir, expectations from this budget were very high, and it has partially delivered.

"The positive is that it recognises that spurring consumption is clearly the need of the hour. Some of the measures being introduced should help improve consumer demand incrementally this year in both rural and urban India," he said.

Gambhir added:" Focused efforts to improve agricultural productivity, together with better target subsidies, are summed up in a 16-point action plan. This should relieve stress in the agrarian economy and boost rural growth prospects for FMCG."

However, he added that it will take much more to achieve the target of USD 5 trillion economy and double farmer income by 2022.

"The real litmus test will be the introduction of deeper structural reforms and the timely disbursement and effective on-ground translation of a clear roadmap of change," said Gambhir.

Expressing similar views, Marico CFO Vivek Karve said, "Reduced personal taxes auger well for consumer goods companies as more disposable income will help drive consumption of branded goods."

Jyothy Labs Joint Managing Director Ullas Kamath said the Budget seems to be a "sincere attempt" in boosting the much needed demand scenario in both rural and urban economy.

"The announcements related to revising individual tax structure, proposed 16-point action plan for agriculture and farmers' welfare coupled with the strategy to doubling farmers' income by 2022 is the step in the right direction. We expect overall impact of the budget will boost consumption and revive consumer sentiments," he said.

According to Parle Products Senior Category Head Mayank Shah, the budget was the "most anticipated one" due to last year's economic depression which burdened many sectors.

"FMCG has been facing headwinds due to stagnating rural demand. This budget will surely increase the discretionary spending and FMCG will be one of the biggest beneficiaries. The provisions announced by Finance Minister on revision in direct taxation for lower personal income tax liabilities along with emphasis on targeted measures for boosting rural economy will have a twin positive impact on FMCG," he said.

Emami CFO N H Bhansali said: "Expectation from the Union Budget were not very high, in view of the fact that few important steps have already been taken by the government like the reduction in corporate tax prior to the budget.

"Looking at the current market scenario, where growth has slowed down, the focus is on stimulating growth rather than fiscal discipline. Accordingly, the Finance Minister has announced many steps for furtherance of agriculture, commerce, industry, services and exports," he said.

CG Corp Global Executive Director Varun Chaudhary said that mass market brands will benefit post budget as the middle class will have more money in their hands post the income tax reduction.

"Better agricultural output combined with urban middle class having more money in their pockets will help discretionary food categories," he said.