Can Budget 2026’s slow and steady approach revive FMCG demand?

New Delhi: The Union Budget 2026–27 was presented at a time when global uncertainty persists, and domestic consumption remains uneven. FMCG companies have been navigating patchy urban demand and a slow rural recovery, particularly among middle-income households. 

With limited fiscal headroom, the government avoided large stimulus moves or headline personal tax changes, an outcome many consumer companies had quietly expected.

Instead, the Budget stayed cautious, prioritising fiscal discipline, continuing public investment, and carrying forward policy themes around agriculture, MSMEs, manufacturing, and ease of doing business. For FMCG, the broad message was reassurance rather than surprise: this is not a “quick-demand” Budget, but one that attempts to strengthen the foundations of consumption—jobs, incomes, supply chains, and confidence.

The fiscal deficit is projected at 4.3% of GDP, signalling a tight balance between support and stability. Some industry voices also flagged that the absence of direct consumption stimulus could delay a sharper near-term rebound, while the increase in securities transaction tax on futures and options could weigh on broader market sentiment.

Why FMCG is watching this Budget closely

FMCG demand has not bounced back evenly across India. Rural recovery has been gradual, and value-conscious shoppers have stayed cautious. In this context, the sector was looking less for headline giveaways and more for measures that can improve income stability, distribution economics and business predictability.

No quick sops, but a clear signal on jobs, incomes and consumption

Most industry feedback converged on one point: the Budget aims to build conditions that can support demand over time rather than trigger an immediate consumption spike. The government’s emphasis on infrastructure, manufacturing, services and MSME resilience is being read as a jobs-and-incomes bet that eventually feeds consumption.

Emami Vice Chairman & MD Harsha Vardhan Agarwal said the budget is pragmatic with a sustained focus on infrastructure, manufacturing, and services, underlining the government’s commitment to job creation, income generation and consumption-led demand. 

“The emphasis on MSMEs and a resilient banking sector reinforces the manufacturing ecosystem. Importantly, the renewed focus on healthcare and the AYUSH ecosystem aligns with rising consumer preference for preventive, wellness-led solutions, creating meaningful opportunities for the FMCG and healthcare sectors,” he said.

Tax continuity and cash-flow comfort for companies

Godrej Consumer Products MD & CEO Sudhir Sitapati pointed to a specific positive for corporate cash flows under the new tax regime. “We particularly welcome the MAT credit set-off being allowed up to 25% of the tax liability under the new tax regime,” he said, adding that it can help free up capital for reinvestment into growth and consumption-led categories.

Dabur India CEO Mohit Malhotra described the Budget as continuity-led. He said, “The continued emphasis on public investment is a key positive, with capital expenditure rising nearly 9% to Rs 12.2 lakh crore for 2026–27, underscoring the government’s commitment to infrastructure-led growth. The sharper focus on Tier-2 and Tier-3 cities, along with the recognition of Global Capability Centres as a growth driver, is expected to broaden India’s economic footprint beyond metros. For companies like Dabur, these measures will help drive deeper penetration of branded consumer products by improving access, logistics efficiency and income resilience across Bharat.

He added that the Budget’s systematic push to strengthen India’s traditional medicine ecosystem is particularly encouraging. “Announcements including the setting up of three new All India Institutes of Ayurveda, training of caregivers in yoga and Ayurveda services, creation of integrated AYUSH-led medical hubs, and the upgradation of AYUSH pharmacies and testing laboratories mark a significant step towards mainstreaming Ayurveda through scale, standards and skills. This aligns well with our long-standing engagement with Ayurveda and rural livelihoods, including partnerships with over 13,000 farmers cultivating medicinal plants across the country.”

Capex at Rs 12.2 lakh crore: What it means for distribution and logistics

Capital expenditure for 2026–27 has been raised by nearly 9% to Rs 12.2 lakh crore. For FMCG, capex is closely linked to lower logistics friction, improved warehousing networks, faster replenishment and more predictable last-mile costs, especially in markets where reach is still expanding.

Pidilite Industries MD Sudhanshu Vats said the Budget “reinforces strong confidence in India’s growth trajectory, anchored in manufacturing, infrastructure and consumption.” He added that “with public capex at Rs 12.2 lakh crore, demand across housing, construction and infrastructure-linked industries will remain robust.” Vats also said the emphasis on digital infrastructure and automation, and AI-led customs reforms and trade facilitation will improve ease of doing business and global integration, giving companies confidence “to invest, innovate and scale” towards Viksit Bharat 2047.

Tier 2 and Tier 3 cities: The next battleground for volume growth

FMCG companies have been increasingly dependent on emerging towns for incremental volumes. Better connectivity, freight movement, and formal retail expansion in these markets can determine how quickly branded consumption scales.

Malhotra flagged the sharper focus on Tier 2 and Tier 3 cities as particularly relevant for consumer goods players, for whom the next leg of volume growth is expected to come from.

Rural demand hinges on agricultural productivity and value addition

For FMCG, rural income is the swing factor. The Budget’s emphasis on productivity and value addition is being read as structurally supportive, but unlikely to deliver an overnight demand jump.

Marico MD & CEO Saugata Gupta said, “The continued emphasis on enhancing agricultural incomes through higher productivity and value addition is structurally positive for rural and semi-urban demand.” Gupta also highlighted the focus on MSMEs and industrial clusters, supported by credit access and formalisation, as supportive of domestic supply chains.

Dairy and allied sectors: Income stability and essential consumption

The dairy and animal husbandry push matters for both rural incomes and essential categories.

Parag Milk Foods Executive Director Akshali Shah said, “The Union Budget 2026 recognises dairy as a key driver of farm income stability, nutrition security and rural employment.” She highlighted a credit-linked subsidy programme to promote entrepreneurship in animal husbandry, including dairy, and the plan to scale the availability of veterinary professionals by more than 20,000, calling it important for productivity and profitability at the grassroots.

Cooperatives and Amul: Tax reforms and freight corridor boost for perishables

Amul welcomed the Budget and said it will provide transformational support to the cooperative movement, the dairy sector and the rural economy, aligned with the government’s vision of “Sahakar se Samriddhi.”

Amul highlighted tax reforms, including extension of income-tax deduction to cattle feed and cotton seed, deduction for inter-cooperative dividend income under the new tax regime, and a three-year exemption on dividend income received by notified national cooperative federations for investments made up to January 31, 2026, subject to onward distribution to member cooperatives.

It also flagged a new Dedicated Freight Corridor connecting Surat in the West to Dankuni in the East as crucial for efficient transportation of milk and perishable dairy products. Amul also cited tax relief excluding the entire value of biogas while calculating excise duty on biogas-blended CNG, and the establishment of Tribhuvan Sahkari University with an allocation of Rs 300 crore.

MSME liquidity: TReDS, credit access and the supply-chain ripple effect

FMCG leaders repeatedly pointed to the “pipes” of consumption, distributor liquidity, vendor payments and supply continuity, where MSME-focused measures can have an outsized impact.

DS Group Vice Chairman Rajiv Kumar said, “The budget strikes a balance between fiscal stability and aggressive growth, positioning India for a resilient economic future.” 

He cited the expansion of TReDS and improved credit access as steps that can ease working capital pressure for distributors and contract manufacturers, and said investments in freight corridors, inland waterways and Tier 2 and Tier 3 infrastructure can reduce logistics costs and strengthen last-mile connectivity.

Joy Personal Care co-founder and chairman Sunil Agarwal said the Budget shows confidence in India’s manufacturing and MSME sector, highlighting efforts to revive industrial clusters, support SMEs through a dedicated fund and strengthen supply chains. He also pointed to easier foreign investment norms and support for women-led and micro enterprises as signals of inclusive growth.

Cycle Pure Agarbathi Managing Director Arjun Ranga called the Budget “a masterclass in balancing long-term capacity building with fiscal discipline,” and cited MSME support through the Rs 10,000 crore SME Growth Fund, the Self-Reliant India Fund, and better liquidity via TReDS. He also flagged the push for women-led businesses and Tier 2 and Tier 3 entrepreneurship, including through “City Economic Regions.”

Food and packaged goods: PLI, organised retail and export ease for small sellers

Parle Products CMO Mayank Shah said, “The Union Budget is a positive step towards reviving consumer demand, especially at a time when spending has been under pressure for the past few years.” He highlighted the PLI outlay for food processing, efforts to boost organised retail, and simplifying export norms for smaller sellers as measures that can strengthen the FMCG ecosystem as inflation and input costs ease.

Bikaji Foods COO Manoj Verma said realistic fiscal planning, outcome-based monitoring and infrastructure-led development matter for food processing companies that rely on predictable demand and efficient logistics, adding that macro stability and formal job creation can sustain demand for trusted, branded products.

Healthcare and AYUSH push: New runway for wellness-led FMCG

Harsha Vardhan Agarwal said the renewed focus on healthcare and the AYUSH ecosystem aligns with rising consumer preference for preventive, wellness-led solutions, creating opportunities for FMCG and healthcare brands building in that direction.

Compliance reform and trade facilitation: Less friction, more predictability

Alongside spending, leaders also highlighted the Budget’s direction on compliance simplification and trade facilitation as positives for operating predictability.

Gupta said initiatives such as Bharat VISTAAR, the expanded AI Mission and higher R&D spending reflect technology-led inclusion, and welcomed compliance simplification as a move towards trust-based governance. Vats pointed to digital infrastructure and automation and AI-led customs reforms and trade facilitation as ease-of-doing-business measures.

Kumar also flagged governance shifts such as moving from penalties to fee-based compliance and simplifying customs duties, saying these allow companies to focus more on productivity and digital optimisation.

What could delay a faster demand rebound

Executives broadly acknowledged that the absence of direct consumption stimulus could slow the pace of recovery in the near term. Market watchers have also flagged the increase in STT on futures and options as a potential sentiment drag, even as the Budget prioritises fiscal discipline.

The bottom line: Slow recovery, but stronger demand foundations

Budget 2026–27 appears designed to manage risk and build capacity rather than chase immediate consumption spikes. For FMCG, the expectation is a slower but steadier revival—supported by infrastructure-led distribution efficiency, rural income measures across agriculture and dairy, stronger MSME liquidity through TReDS and credit access, and reforms that reduce friction in doing business.