The Bharat growth story is all set to become bigger. Through the pandemic last year when life literally came to a standstill in urban India, it was the tier 2-3-4 markets which displayed exceptional resilience. Be it companies such as Hindustan Unilever, ITC or Britannia, all of them experienced growth on the back of rural consumption. Rural for most of these companies was a laggard just a year ago. Be it higher agricultural yields that increased disposable income, reverse migration or less incidences of the pandemic, it is rural India which came to the rescue of India Inc in FY21. It's not just staples, biscuits and soap manufacturers, even car-makers and white goods brands saw green shoots in rural India. The Union Budget which has announced huge outlays for bolstering rural infrastructure has made industry stalwarts even more upbeat about the Bharat growth story.
Be it extended agri-credit targets, increased provision for rural infrastructure development or the setting up of five fishing economic hubs, captains of India Inc are hoping that these measures would significantly help in stepping up consumption. "The enhanced capital expenditure particularly on infrastructure, will create livelihoods and provide an accelerated thrust to the v-shaped recovery trajectory. The heightened spends on agriculture and rural infrastructure development are aligned to the comprehensive policy interventions aimed at creating agri value chains to raise farm incomes. These augur well for the economy and will spur a virtuous consumption-investment-employment cycle," says Sanjiv Puri, Chairman and MD, ITC.
"Overall, the Union Budget ticks the right boxes with an encouraging capital infusion in infrastructure and funding the same through prudent borrowing , disinvestment and restructuring of allocations without impacting consumers negatively. I believe that, going forward, this will bode well for generating demand, driving consumption and sustaining the growth momentum needed to revive the economy," adds Saugata Gupta, MD and CEO, Marico.
A well laid-out rural infrastructure would not just generate more income opportunities for rural consumers and hence increase their spending power, it would also pave the path for consumer companies to strengthen their distribution might in rural markets. Even though 80 crore Indians live in rural India, most consumer companies have found it difficult to spread their wings due to infrastructure challenges. "With key focus on building Atmanirbhar Bharat, there are significant allocations for infrastructure building especially for rural India. The Budget enhances allocation to agri-credit and also prioritises the agricultural and agri-allied sectors. All these measures are expected in generating an increase in rural consumption which is necessary for reviving the economy," says Harsha V. Agarwal, Director, Emami Ltd.
However, R.S. Sodhi, MD of India's biggest food company, Amul, has a slightly contradictory opinion on the Union Budget. He says that though the Budget at an overall level will surely boost consumption, the focus should have been more on building the agriculture and dairy infrastructure. "The focus should have been on infrastructure which can generate returns in the long-term without subsides."
"They have reduced custom duty on animal feed, but that won't make too much difference. Around 27 per cent of agriculture GDP comes from the dairy sector, and I was expecting more concrete changes such as reduction of GST on categories such as paneer," adds Rahul Kumar, MD, Lactalis India.
Sanjesh Thakur, Partner, Deloitte India, says that Union Budget FY21-22 will surely improve consumption propensity of the average Indian, especially of those living in the tier 2-3-4 markets. "But a lot depends on how the economy fares overall. All the measures that been announced have to be implemented only then can one feel the impact."
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