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Higher consumer spending under NDA 3 may push India’s adex, expects India Inc

With the Narendra Modi government coming back to power, India Inc is expecting the government to focus on market-friendly policies to revive consumer sentiment. Rationalised GST slabs and higher government spending on infrastructure and welfare schemes would accelerate consumer spending, leading to higher ad spend by brands

The first term of the Narendra Modi government wasn’t easy for industries such as FMCG, auto and real estate as the government introduced several disruptive steps, including demonetisation and GST.

Low consumer spending because of a slowdown in GDP growth also crippled India’s adex as the growth remained subpar.

But with the Narendra Modi government coming back to power with an even better majority, India Inc is hoping that the government would introduce market-friendly policies to push growth and restart the investment cycle, which in turn would lead to higher advertising expenditure by brands.

According to GroupM, India’s adex likely to see a 14% growth this year and might touch Rs 80,000 crore.

BK Rao

BK Rao, Marketing Head, Parle Products, said, “When the consumption goes up for FMCG or for any sector durable and non-durables, it is going to increase the spends because consumer at the end has the disposable income. There is going to be a huge consumption drive across segments from housing to durables. When that happens, advertisers are going to spend more because they are going to get better sales. Now, all the initiatives are going to translate into higher consumption, which will mean a better or higher investment across the sectors. If all this gets translated into positive things then it will indirectly lead to higher GDP, which will help the country to become stronger in the global economy.”

Lalit Malik, Chief Financial Officer, Dabur India Ltd., also said the new government should focus on overall economic development and employment creation, which would go a long way in accelerating consumer demand and improving overall GDP growth. “The government will also have to ensure that fiscal incentives should reach the pockets of rural consumers, which would improve their purchasing power and boost consumerism, particularly for branded consumer products. There is an urgent need to help corporate India by balancing between reduction in tax rates and providing incentives. The improved profits would be ploughed back into acceleration production and industrial growth,” he said.

Raghvendra Nath, MD of Ladderup, added that from the perspective of the marketer, this win removes the clouds of uncertainty and has a great significance for India from a global viewpoint. He said that the continuation of the NDA regime would mean that the existing momentum is maintained. The marketer states that fiscally, India is well-placed with tax/GDP ratio showing an uptrend. A stable government would contain fiscal profligacy and maintain fiscal deficit to manageable levels.

 “Monetarily, India has seen moderate and range-bound inflation. As a result, we have real interest rates. There is a bright probability that interest rates in the country can come down significantly if inflation levels are maintained. This would be translated into higher consumption demand as well as aid private investments,” Nath added. 

Pushkar Mukewar, Co-Founder and Co-CEO of Drip Capital, a US-based trade finance firm also stated that they hope the slew of measures announced to improve credit access for MSMEs will be put into action. "So far, much of the policy support to fintech has been on the retail side, that is, digital payments. What is now needed is a big push to promote fintech in areas such as MSME lending and export finance to help solve the credit gap problem for the MSME sector. Additionally, if PSUs are indeed mandated to ensure that 25% of their purchases are from MSMEs, this will give the sector some much-needed impetus. We also hope that the wrinkles in GST will be ironed out in the next few years," he said.

On the other hand, Dr. Prathap C. Reddy, Chairman, Apollo Hospitals Group, hopes to have continued focus on healthcare with Ayushmaan Bharat growing in scope to cover more beneficiaries with a prudent approach to pricing and reimbursements to encourage widespread adoption. 

Aditya Ghosh, CEO, India and South Asia, OYO Hotels and Homes, said he hopes for a new beginning of inclusive growth, which helps the common man; renewed vigour in creating more opportunities for all; progressive thought and reforms that enable growth and entrepreneurship; and drive maximum participation of young people.”

Experts feel that macro factors are likely to improve in the coming years. The continued government expenditure would mean healthy GDP growth rates in the next five years. PSU banks are also likely to make a comeback and participate in the credit growth, once the net NPA levels start reducing and the re-capitalisation is done by the government. With average capacity utilisation going around 75% or so, Capex cycle is likely to start which would boost both GDP as well as employment levels. Global flows are also going to be positive for India. With stability at the centre, we may see both FDI and FPI growing at a fast pace in the coming years. In totality, if we look at all these four factors, the Indian economy is a sweet spot. And that would spell good news for the capital markets.

“If the policies were to be implemented, driving the growth more than the traditional average of 8%-12% won’t be tough. Some arenas such as digital and social media space might see growth levels of 30%-50%, or even upwards depending on the ever increasing quality of content and consumer engagement efforts taken by brands and agencies alike,” said Pratyush Chinmoy, Head of Marketing, Onida.

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