Amid weak demand for packaged goods from villages, several major measures have been taken in the interim budget, which are likely to help in rural employment and increase the income of farmers. However, companies said the budget did nothing to address low consumer demand among lower middle income households.
Finance Minister Nirmala Sitharaman announced to increase capital expenditure by 11.1% in the interim budget. 11.1 trillion. The government also announced plans to step up efforts to increase value addition in the agriculture sector and farmers’ income, besides promoting private and public investment in post-harvest activities. Through rooftop solarization, 10 million families will be able to get up to 300 units of free electricity every month. There has also been a year-on-year increase in the allocation for the rural employment program under the Mahatma Gandhi National Rural Employment Guarantee Scheme. 86,000 crores.
Additionally, the government will launch a housing scheme for the middle class to encourage the middle class to buy or build their own houses, although no time frame has been set for this.
“The continued stimulus on government capital expenditure outlay is a strong positive for the economy. One challenge for the economy is the decline in consumer demand, especially among the rural and lower middle classes. Although this has not been addressed directly in this interim Budget, I am hopeful that it will be addressed in the full Budget in July,” said Anuj Poddar, MD and CEO, Bajaj Electricals Ltd.
Asif Malbari, CFO, Godrej Consumer Products Ltd (GCPL), said the interim budget is committed to a “long-term” vision of strong economic growth. “Continuing the path of fiscal consolidation is a positive sign for overall economic growth, which has the potential to boost consumption patterns in the long term. The focus on enhancing connectivity and infrastructure also bodes well for Indian industry, including the FMCG sector.’ ‘
To be sure, consumer goods manufacturers have been challenged to generate demand among rural and middle-income households. While demand for premium goods remains strong.
Meanwhile, Anand Ramanathan, partner and leader of consumer products and retail, Deloitte India, said the government’s focus on sectors like housing, tourism and infrastructure spending will have a multiplier effect on consumption among middle-income households.
“Overall, the Budget will benefit FMCG and consumer durables companies with an increase in rural and middle-income household consumption,” Ramanathan said.
Certainly, the final budget will be presented by the new government in July 2024. The government also did not tinker with direct taxes during the interim budget announcement on Thursday.
Dabur India CEO Mohit Malhotra said the government’s increased capital expenditure lays the foundation for long-term economic growth. “While not immediately pandering to populist impulses, the budget makes significant allocations for infrastructure development and provides incentives for rural housing, agriculture and fisheries,” he said. Ayushman Bharat for Asha and Anganwadi workers The expansion of health care coverage under the PM Modi scheme, and the target of the “Lakhpati Didi” scheme to 30 million women, is a big “positive” for rural consumption, he said.
Consumer goods makers reported “stable” demand in the December quarter. However, due to low agricultural yields and uncertainty of future crop production, rural consumer sentiment remains weak. Urban growth has been ahead of rural areas in many industries and premium products have recorded strong growth.
Abneesh Roy of Nuvama Securities said the announcements in the budget on affordable housing scheme for middle class families as well as private and public investment in post-harvest activities are overall good signs for the packaged consumer goods sector, but in the near term Consumer demand in the period to 2024 will depend on normal monsoon.
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Published: 01 Feb 2024, 03:00 PM IST