Union Budget 2023: Tame inflation, boost rural growth; what consumer goods majors want from FM Nirmala Sitharaman

With the Union Budget at the corner, the country’s consumer goods makers have put forward a host of demands from the Finance Minister that they hope would lift the economy and boost demand. As demand for consumer goods slows down, especially in the rural economy, coupled with the steep inflationary cycle that continues to impact their costs, leading companies like Hindustan Unilever and Godrej to TTK Prestige are urging Nirmala Sitharaman for quick measures to improve domestic demand.

According to Nadir Godrej, Chairman and Managing Director of Godrej Industries, boosting GDP growth should be the priority of the upcoming union budget. "Global inflation, China's economic slowdown, the pandemic's aftereffects, and the conflict between Ukraine and Russia pose a great challenge for the Indian economy. Although there is wage-push inflation in core inflation, as this is only 25 per cent of the basket and since commodities make up most of our inflation basket, and their prices are dropping globally, headline inflation is expected to be around 5 per cent. The global slump poses difficulties for overall growth. Exports have fallen. Therefore, growth must be prioritised,” he said.

Godrej, who assumed charge of the diversified business group last year, is of the opinion that to achieve a higher GDP growth rate increasing government borrowings shall be acceptable in the short-term.  “The type of deficit should be our primary concern rather than the overall budget deficit. Any investment that fosters progress is appreciated. Subsidies should be cut, and direct transfers to the underprivileged should be made. There might be a temptation to interpret the Budget as populist, and I hope that won't happen. The government must increase its efforts in infrastructure, skill development, education, health care, financial inclusion, and other sectors critical to empower women. Investing in the workforce can help create jobs and raise women's wages, ultimately leading to improved long term economic growth that benefits the bottom of the pyramid,” he added.

According to Sanjiv Mehta, CEO & MD, Hindustan Unilever, while volume offtake in the rural market remains in the negative zone, the extent of de-growth in the hinterlands have come down in the past few quarters - from a double-digit de-growth in early-2022 to six per cent negative growth in December. However, it is the steep inflation in prices of fast-moving consumer goods products that is hurting. 

“My expectation from the Budget would be to stimulate demand since we are seeing some slowdown in the second half of FY2023. The broader focus of the budget should be to continue promote growth with a focus on local manufacturing and exports, keeping in sync with the ‘Make-in-India’ agenda. The supply side has been well managed and the demand side needs more attention. Inflation has been sticky and difficult for large section of the society and the government must look at reducing some taxes, both direct and indirect so that more money is available with the people,” said Chandru Kalro, Managing Director, TTK Prestige Limited.

According to Kalro, the government needs to focus on improving the purchasing power of the middle-class households. “The middle class is the backbone of the economy. They’re the main drivers of consumption and economic growth and there needs to be a special focus on them. The government must consider tax benefits to the middle-class consumer, the salaried employees who have paid their taxes honestly always. It will leave them with additional disposable income in hand which will help drive consumption and boost the economy,” he said.

Manish Aggarwal, Director, Bikano at Bikanervala Foods, has demanded that the government focuses on four broad areas. “First, the Budget must ensure that there is a revival of demand in the economy particularly rural demand, which has been somewhat lacklustre this year. This would also necessitate higher capital expenditure with a view to resolve post-pandemic supply chain disruptions and to improve long-term supply chain efficiencies in the hinterland markets. Also, in light of the fear of a possible recession in the West in the coming months, consumption expenditure in the larger domestic economy needs to be encouraged,” he said.

“Second, even as commodity prices have exhibited signs of softening, there is a need for cooling down of some raw materials and inputs especially critical to the food FMCG segment. Third, the budget should also address the rising prices of various packaging materials, again crucial to FMCG since packaging typically contributes to nearly 10 per cent to the cost. Fourth, a rethink on contract farming allowing a more balanced risk-sharing arrangement between farmers and industry with adequate in-built safeguards for farmers. While this would give assured prices to farmers, it would also result in the availability of precisely desired quality and types of inputs and ingredients for FMCG players,” added Aggarwal.

Also Read: Budget 2023: What fintech companies are expecting from Finance Minister Nirmala Sitharaman