Finance Minister Niramala Sitharaman unveiled the Union Budget in the Parliament and announced several reliefs for different categories on Wednesday. Several key players from the FMCG sector have welcomed the Budget and emphasised that they are hopeful of witnessing an improved consumer spending this year.
According to Namit Puri, Managing Director and Partner-Retail and FMCG at BCG India, the country continues to be a bright spot not just in economic performance but also consumer confidence. However, the impact of inflation has really impacted cons
“While the commodity inflation has softened lately, costs of key input raw materials like cereals, milk, pulses, etc. are still up by 25-40% over last year. This has led to price increases of 8-10%+ over last year resulting in consumption volume slowdown for the FMCG sector. Urban consumption grew at a mere 1-2%, whereas rural demand has been flat or seen a decline depending on the category,” he said.
In Puri’s views, the budget addresses the ‘Winning versus inflation’ through prudent policies, supply side interventions and changes in the taxation structure that mitigate the impact of inflation, put more money in the hand of consumers and unlock consumption and arrest downtrading especially with the aspiring households (. i.e.- with a HH income of < 5 lacs).
The budget, in his opinion, also focuses on reviving rural demand by boosting disposable income, allocation to farms and higher fund allocation on rural infrastructure, connectivity, and mobility to create long-term jobs.
“As India still remains a net importer of various essentials as well as discretionary items especially consumer electronics and components. PLI has been a great success in catalysing the change. This sustained focus would go a long way in encouraging start-ups and local manufacturing, thereby making Indian companies competitive globally,” he added.
As per Harsha Vardhan Agarwal, Vice-Chairman and MD, Emami, the Government’s consistent efforts towards upliftment of infrastructure, agriculture, rural economy and inclusive growth have resulted in India emerging as a prominent global player.
“This budget goes to re-emphasise the government’s pro-industry and pro-people stand, which will further boost the economy. With increased investments in the rural sector and reduction of personal income taxes, which the common man has been yearning for, the budget also bodes well for the FMCG industry. It will have a cascading effect in driving consumption in India,” he said.
Similarly, Sameer Shah, Chief Financial Officer, Godrej Consumer Products also noted that the Union Budget 2023 is ‘welcoming’ and prioritises India’s macroeconomic growth.
“The newly proposed personal income tax slabs will directly provide a huge relief to the larger section of Indian population. The rationalised tax slabs will be beneficial to the Indian economy as it will increase consumer’s disposable income. Furthermore, the proposed capital spends will boost consumption. Additionally, the focus on last mile connectivity and national infrastructure will strengthen the key network rural markets, providing a consumption boost,” he stated.
As per Mohit Malhotra, Chief Executive Officer, Dabur India, Sitharaman’s last full-fledged Union Budget before the 2024 Lok Sabha elections is a progressive, growth-oriented one that promises to put more disposable income in the pockets of the consumers, particularly the middle class, while focusing on building a new India with its heavy focus on capital expenditure.
“The biggest positive, according to me, is the 33% increase in overall Capital Expenditure Outlay on Infrastructure Development, which will take India towards becoming a true global powerhouse and help urbanise the hinterland. The Government's decision to set up a Rs 10,000 crore per year Urban Infrastructure Development Fund to be used for creating infrastructure in Tier-2 and Tier-3 cities will go a long way in boosting overall consumer confidence, and also help generate employment,” he said.
In his views, the greater focus on agriculture with a new Agriculture Accelerator Fund being set up; extension of the concessional institutional credit through Kisan Credit Cards to animal husbandry and fisheries sector; and an outlay of Rs 2,200 crore towards Atma Nirbhar Clean Plant Programme will provide the much-needed solutions to present-day challenges of farmers.
“It would also be highly beneficial for companies with a strong rural footprint and would help drive growth for the consumer products industry. Dabur has been investing ahead of the curve in strengthening its rural footprint, which today covers over 1,00,000 villages. This exercise would further gain pace, going forward,” he opined.
Saugata Gupta, MD and CEO, Marico, also said, “I believe, with this seminal Union budget FY 23-24, the government has taken significant steps towards building a $5 trillion economy and fulfilling its vision for India. With a razor-sharp focus on boosting infrastructure, employment creation, start-up economy, and increased capex, the government has ensured that the country is firmly on its path to becoming one of the world’s leading economies.”
He also went on to add that the tax rebates, notably, will ensure more money in the hands of consumers, and that Marico expects a boost in demand generation going forward. Overall, he shared the belief that the budget has the potential to revive the demand and propel long-term economic growth.
“The budget has also covered some key initiatives such as Pradhan Mantri Kaushal Vikas Yojana 4.0 which will certainly be beneficial for the youth of India. In addition, it also addressed the supply chain challenges faced by farmers through the provision of the Agriculture Accelerator Fund. Additionally, the launch of national green hydrogen will aid in reducing the dependency on imports of fossil fuel and is a step towards Atma Nirbhar Bharat,” he added.
As per N Chandrasekaran, Chairman, Tata Sons, the Finance Minister has aptly prioritised growth, given the challenging macro backdrop of slowing global growth and tightened financial conditions.
“I welcome the move to a more productive expenditure, budgeting capital spending of Rs 10 lakh crore, which is a 33% increase over the previous year and the highest in the past two decades as a share of GDP. At the same time, the revision of income tax slabs under the new tax regime should increase purchasing power for many. Loan guarantees and other assistance toward MSMEs, a focus on tourism, and measures announced for the care economy (like new nursing colleges) will boost job creation,” he stated.
He also went on to add that this budget shows not only the kind of policy support that is necessary for the economy at this moment but also strengthens the strategic foundations for the country’s long-term growth.
“We are witnessing three major transformations globally: rapid digital adoption, the rebalancing of supply chains, and environmental sustainability. This budget helps position India to play a leading role in all three transformations,” he opined.
Angshu Mallick, MD and CEO, Adani Wilmar, also congratulated the central government for guiding the country to become the fifth largest economy in the world and said that the Union Budget 2023 reflects upon the government's plan to stimulate India's economy with a well-planned policy and regulation-based framework.
“We believe, the various schemes and policies will play a critical role in laying the foundation for accelerated digitalisation and enabling Indian businesses to become prominent players on the global stage. As one of the leading players in the FMCG sector, we are optimistic about a strong uptick in rural demand on the back of a massive wave of digitisation through an array of infrastructure-led initiatives announced by the Government, thereby empowering the farmers and the agricultural sector. Furthermore, decentralisation in storage facilities will provide further assistance to ensure India’s surplus food produce is not wasted,” he stated.
Mallick also went on to add that the total CapEx outlay in the Union Budget has been enhanced by 33% from 7.5 lakh crore to 10.0 lakh crore, which takes it to an all-time high of 3% of GDP.
“This positive outlook will surely stimulate consumption, generate opportunities both in rural and urban employment and jack up local production. Overall, the Union Budget 2023 lays a strong foundation for India@100 with enhanced focus on the farming sector, which is the backbone of the Indian economy as well as digitisation that will open new growth opportunities for the economy,” he added.
Tarun Arora, Chief Executive Officer, Zydus Wellness, also said that the 2023-2024 budget reflected a balance whilst focusing on long-term economic development through a progressive increase in capital investments and controlling fiscal deficit.
Furthermore, with a proposal driving inclusive growth within key focus areas, the budget, in his viewpoint, suggests viable public-private partnerships to ensure multi-faceted sustainable development across sectors.
“Multiple priority areas have been addressed with a focus on Green Energy, AI, digital transactions, housing etc. As a consumer demand-driven company, the allocations, collaborations, and rebates will help make our brands more sustainable while building a circular economy on a macro level,” he opined.
Moreover, he also went on to state that with the supply-side actions and other budget proposals, he hopes to see some of these translate into boosting disposable income and improving consumer demand.
According to Ghanshyam Khandelwal, Chairman, BL Agro, this year’s budget went beyond the realm of imagination as it’s a ‘Swadeshi’ budget through and through - that equally benefits all and sets the country on a path to steep progress and development.
“While it did not shed any particular light on the FMCG sector, it broadened the horizon and touched upon every area where India needed growth and progress. Instead of narrowing the focus to a limited niche or industry, it supports every area of potential in the economy, from MSME to education, from AI to green energy,” he said.
Khandelwal also went on to state that with regards to the aforementioned developments and the control of the fiscal deficit, the budget threads the needle with precision and indeed is ‘praiseworthy’.
“The three niches of concentration were skill enhancement, filling the gaps in production or infrastructure, and health. Take, for instance, health and wellness. The colleges for nurses are only part of it; the push on millet is an ancillary route to wellness. Millets like jowar and bajra are a natural way to provide the body with supplements, offering more holistic nourishment,” he added.
As per Samir Kumaar Modi, Managing Director, Modi Enterprises, the FMCG industry has exhibited a healthy recovery despite global inflation and economic slowdown during the past two years.
“With the budget estimating India’s growth at a rate of 7% in FY 2023, this first budget in Amrit Kaal focuses on creating ample opportunities for Indians, especially the youth, and provides a strong impetus to the country’s growth,” he said.
Additionally, he also shared the views that the proposed exemptions in personal income tax and incentives for skill development are expected to boost consumer sentiment thereby generating demand and spurring consumption.
“This coupled with the government’s focus on India’s green growth strategy will catalyse our journey to become a more self-reliant nation,” he added.
Sharing her opinion on the Union Budget 2023, Shaily Mehrotra, CEO and Founder, Fixderma, also said, “This year's budget session has taken some prudent initiatives for MSMEs and India Inc for start-ups. By injecting 9,000 crores into the corpus, policies like the redesigned program will go into effect on April 1, 2023. This will provide for an additional 2 lakh crore of guaranteed loans without using any collateral. Additionally, the cost of the credit will be decreased by roughly 1%, which is, in my opinion, a very favourable development.”
She also went on to add that a noteworthy measure taken in the new budget has been to introduce relief for MSMEs, wherein the government and government undertakings would reimburse 95% of the forfeited cash linked to bid or performance security in cases where they fail to complete contracts during the Covid period.
“This action will further increase the confidence of emerging small enterprises and start-ups,” Mehrotra said.
KV Hariharan, Sr Vice-President - FP&A, Data Analytics and Strategic Planning, Amway India, said, “As a health and wellness company, it was encouraging to witness the sustained focus on innovation and research in the health space. With consumers today focusing on preventive healthcare, the nutraceutical industry will play a significant role in creating a healthy nation. Towards this, our expectation was that Government will rationalise GST on healthcare supplements.”
“It is also heartening to see youth power and economic empowerment of women as the key drivers of the proposal with the former being one of the ‘saptrishis’ of the Union Budget.”