FMCG sector navigates muted rural demand and eyes government support in the upcoming budget for growth, innovation and healthier product incentives
The rural demand has been muted over the past quarter for almost all fast-moving consumer goods (FMCG) companies. The Interim Budget that will be presented on 1 February will be a Vote on Account and the players do not expect any big bang announcements in the Interim Budget.
However, in the Interim Budget ahead of the general elections, it is expected that the government will prioritise rural development and social welfare schemes in order to boost consumption and fuel the Bharat growth story, which is expected to result in higher demand by the first quarter of the next fiscal year.
Despite this, the players present in the FMCG sector are still hoping for a positive change in the upcoming budget, which revolves around increased government support for rural development, infrastructure and initiatives that increase consumer spending.
“Almost all FMCG companies are seeing a slowdown in rural demand. Hence to increase demand in these areas, more funding should be allocated to infrastructure, rural initiatives and the agricultural sector,” said Mayank Shah, Vice-President, Parle Products.
Shah anticipates that in order to resurrect consumer demand, the government should put more money in the hands of consumers which can likely be achieved by lowering taxes or raising tax slabs.
Additionally, the sector expects to see strong growth next year, driven by increased demand in rural areas, favourable prices for raw materials and the likelihood of a good monsoon.
“If the monsoon remains normal then we expect a healthy recovery in rural demand next fiscal. The government has been taking a number of measures to help the farmers and this is likely to lead to better farm productivity and higher realisations leading to increased incomes,” Shreeram Bagla, MD, Annapurna Swadisht stated.
Also, Manish Aggarwal, Director, Bikano, Bikanervala Foods eagerly anticipates potential government efforts to uplift the FMCG industry,
“We also foresee a heightened focus on technology integration. This integration is expected to propel the FMCG sector forward by creating innovative approaches to connect with consumers and streamline operations,”
Aggarwal highlighted.
Currently products containing more than 75 per cent millet are subject to lower GST. Similarly, more incentives will motivate businesses to switch to creating healthier products, Shah added.
In addition, Shah anticipates granting incentives to businesses that offer healthier options to consumers. In line with the government’s initiative of promoting millets, the government should further encourage companies to launch healthier options containing millets.
