Players in the retail, e-commerce, fast-moving consumer goods (FMCG), and consumer durables sectors are a happier lot. The Budget has put additional money to the tune of Rs 12,500/annum in every tax-payer’s pocket. This has been achieved by reducing the income tax rate from 10% to 5% in the Rs 2.5-5 lakh income bracket.
“This would increase their disposable income, which they may spend on consumer products, resulting in increased revenue for consumer-business players,” said Anil Talreja, partner, Deloitte Haskins & Sells LLP.
The measures, according to Sunil Duggal, chief executive officer, Dabur India Ltd, would put more money in the pockets of the common man. “This Budget is a consumption focused statement that seeks to drive consumerism, particularly at the bottom of the pyramid. The focus, this year, has clearly been the farmers and people in the hinterland. I am quite happy with the government’s continued focus on the rural sector and enhancing of the allocation under MNREGA,” he said.
These, coupled with the skill development initiative, is not only expected to strengthen the hands of the rural poor, but also help put more disposable income in their pockets and ensure continued rural demand for branded consumer goods.
It is largely positive for the FMCG sector given the strong emphasis on rural stimuli, said Vivek Gambhir, managing director, Godrej Consumer Products Ltd. “Increased disposable income will drive demand for mass products,” he said.
The Budget will provide the much-required stimulus for reigniting the consumption growth after a slump caused by demonetization, said Saugata Gupta, managing director and CEO, Marico Ltd. “This Budget is forward looking, consistent and pragmatic with overall focus on broad-based growth. We expect it to boost consumption and create more jobs,” said Gupta.
Echoing the sentiments, Kamal Nandi, business head and EVP, Godrej Appliances, said the Budget will have a positive effect on the consumer appliances segment through increased demand for such products and push towards domestic manufacturing. “After the recent demonetization move and resultant fall in demand for consumer appliances there was an urgent need to spur demand and revive the segment. Lower tax rates for individuals and rebate for others should give a fillip to consumer spending and demand for consumer appliances.”
The middle class has been given tax concession, which Rakesh Tarway, head of research, Reliance Securities, feels is good for consumption of basic goods.
“We see substantial demand emerging from tier II and III cities, as the government focusses on enhancing agriculture income, personal hygiene and sanitation. The focus on digital payment will increasingly shift consumers towards organised players,” said Ullas Kamath, JMD, Jyothy Labs.
Additionally, industry experts said that a reduction in tax rate by 5% to the companies with turnover of up to Rs 50 crore would benefit players engaged in consumer business segment falling under this threshold with increase in profitability.
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