Fast-moving consumer goods (FMCG) sector has felt the heat of economic slowdown in 2019. So, when Finance Minister Nirmala Sitharaman presents her second Union Budget in Lok Sabha in a short while from now, FMCG companies in India will be eagerly waiting for announcements that can bring consumers back to stores.
In a recent report, market researcher Nielsen pointed out that growth in the FMCG sector dwindled to a three-year low of 9.7 per cent in 2019, primarily due to sharp contraction in rural market. Even quarter-wise, growth progressively declined from 13.6 per cent in the first quarter of 2019 to 7.3 per cent in the last quarter of the year. Meanwhile, inflation skyrocketed to a five-year-high of 7.35 per cent in December 2019, which also harmed the chances of revival for the FMCG sector.
FM Sitharaman's budget announcements are likely to be centred around these economic targets that'll have direct impact on FMCG sector.
Boost take-home salaries
One of the most-awaited announcements in Budget 2020 is the changes in tax slabs and tax rates so as to alleviate some of the tax burden on middle-class, salaried taxpayers. This is meant to leave them with more money to spend, which can then be used to revive demand.
FULL COVERAGE: Union Budget 2020
Improve rural economy
Most of the consumption in India happens in its rural parts. But demand in rural India has contracted due to a struggling agriculture sector. Budget 2020 might include measures related to employment schemes like MGNREGA which can put more money in the hands of rural consumer. Agriculture sector might also get some fillip to help associated workers earn more, and in turn, spend more.
Address jobs problem
Job scenario in India has been bleak for quite some time now, and the ongoing economic slowdown has made matters worse. FM Sitharaman is likely to address matters pertaining to job creation in her Budget speech. This can help in creating new consumers and generating more demand.
Check on inflation
Rising prices, in both consumer durable and consumer non-durable sectors have eaten into consumer demand. Government needs to check inflation in order to encourage consumption.
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