The fast-moving consumer goods (FMCG) sector expects finance minister Nirmala Sitharaman to announce incentives to revive dampened consumer demand in Budget 2020. The sector wants stimulus packages in the form of reduced income tax slabs, employment creation and incentives for rural consumers.
FM Sitharaman will present the Union Budget 2020 on February 1. The government has been working towards ensuring measures to stimulate consumption and strengthen the economy but the FMCG expects more from the government in terms of budgetary announcements.
FULL COVERAGE:Union Budget 2020
Here are some of the key expectations of the FMCG sector from the Modi govt:-
1. Control consumer inflation: Another way in which the government can help the common man is by ensuring that inflation doesn't rise beyond a level. A 7.5% rate of consumer price inflation (CPI) is a very high rate of inflation largely because of the high prices of the vegetables and fruits in the markets. If the government can ensure the prices stay within limits, that would be a huge incentive for the common man.
2. Personal tax cut: Lower personal income tax rates to leave more disposable income in the hands of the common man which will help boost demand for products and services in the economy. This will eventually lead to more production and churn in the economic activity
3. Reduce interest rates: Although this doesn't relate directly to the budget, but if the government can ensure that the interest rates are brought down for the common man, it will be a major boost to consumption in the economy. Interest rates are still high particularly those of private sector banks and the entire repo rate reduction by the Reserve Bank of India (RBI) has still not been passed by the banks to the consumer as well as to the industry. About 1% of repo rate still remains untransferred to the consumer as far as bringing down the rates are concerned.
4. Low GST on consumer durables and FMCG products: The other major expectation of the common man and the middle class is that the prices of items of daily use should be brought down to make them affordable, especially consumer durables and some FMCG products. There is also a big expectation that GST rates on some of these items would be rationalised and brought down to aid consumption.
5. Support to the direct selling (DS) industry- The finance minister is also expected to give the right impetus to direct selling (DS) industry to help it realise its full potential and further contribute to the economic growth and encourage entrepreneurship. With this focus, the FMCG sector wants the government to bring the DS services under the reverse charge mechanism. This step will significantly mitigate the burden of GST compliances on small businesses (run by direct sellers) thereby bolstering productivity and fuel the growth of the DS industry.
Apart from these measures the FMCG sector also expects FM Sitharaman to announce more investments in the infrastructure sector, give incentives to drive rural consumption and create more jobs in the economy.