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Budget looks to boost spend on cheaper, Indian products

Arpita Mukherjee     July 10, 2014

An increase in disposable income in the hands of consumers would result in increased spending power. Add to that the reduced prices of domestic products and lower end consumer goods, and you have a happy customer.

At a time when consumers are holding on to cash, the Union Budget presented by Arun Jaitley has said it will put more money in their pockets. Jaitley recommended that the personal income tax exemption limit be raised by Rs 50,000, from Rs 2 lakh to Rs 2.5 lakh.

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Kumar Rajagopalan, CEO, Retailers Association of India is positive about the recommendations. "An increase in the personal income tax limit will create disposable income in the hands of the consumer while the single window clearance facility for smaller businesses will be an added impetus for the industry," he says.

The proposed 'Digital India' programme is likely to will boost internet and in turn boost consumer purchases online as well, says Vishal Mehta, Founder & CEO of online retailer Infibeam.com. "Penetration with better and faster connectivity,  leading to a rise in e-commerce trade and consumption," he says adding that "the  proposed tax incentive on many consumer products including lifestyle and whitegoods will further increase online purchase."

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Rajagopalan agrees. "The Budget's emphasis on improving rural internet and broadband connectivity will enable an increased market size for retailers and improve overall consumption story for the country," he  says.

Domestic footwear players would also benefit from the reduction in the excise duty from 12 percent to 6 percent on footwear priced between Rs 500 and Rs 1,000 per pair. (quote}

Domestic players who price their products in that range would benefit from an increased demand from customers. However, there is little on offer for premium products.

"Most of the premium malls have international brands, and that is going to become a little expensive," says Mukesh Kumar, VP, Infiniti Malls adding that this may not be good news for international clothing brands.

Kumar however suggests that the impact on consumers of such products would not be very high and is also unlikely to dampen the interest that mid and high-end brands have in the country as price sensitivity is less in the segment.

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