This year, Finance Minister Nirmala Sitharaman has presented a Budget that is more from a long-term vision of ensuring economic growth through capital investments and tech-led initiatives. The finance minister announced a slew of measures during the Budget Speech that ensures the growth trajectory for the country amidst global uproars.
The past few quarters have been tough for the consumer sector due to the increased cost of raw materials and inflationary pressure in the economy, which resulted in minimal volume growth for the industry. Demand from rural India which contributes to nearly about 35 per cent annual sales for the consumer and retail sector showed stagnation. The Budget focusses on inclusive development and thrust provided to the economy by way of capex as well as farmer-friendly initiatives will help in the long-term development of the consumer sector.
Promoting Atmanirbhar Bharat
If we look from the manufacturing perspective, India’s exports grew exponentially by over 55 per cent in the last nine months for electronic goods and mobile phones. To further accelerate the momentum, the government has rationalised the customs duty structure import of parts of mobile phones and TVs. The government has maintained a clear focus on exemptions to essential commodities and concessions on input/components that are not adequately manufactured in India. This will further boost the government’s vision of manufacturing under the Atmanirbhar Bharat and ‘Make in India’ ambit.
The vision is further supported by a phased manufacturing plan (PMP). The BCD rates in respect of different stages of the value chain of these products are calibrated in a manner that encourages the gradual deepening of domestic value addition. In addition, the government has attempted to overcome the inverted duty structure on certain consumer items, such as kitchen equipment. Continuing with the theme, we expect further announcements for widening the ambit of PLI schemes in India. Additionally, the government has announced a slew of measures for making India the hub of exports for lab-grown diamonds. The country contributes about 15% of global production, which will be further enhanced due to a drop in import customs duties to 0% from 5%.
Ensuring Disposable Income
There has been a marginal increase in the consumer’s disposable income due to the rationalisation of personal income tax. The move will bolster consumer sentiments and increase the demand for FMCG products and consumer durables. Altogether tax rationalization would provide an additional disposable income of Rs 35,000 crore, which can provide a big boost to the consumer demand
Pushing Tourism – Swadesh Darshan
The COVID-19 pandemic badly impacted the travel and tourism industry. While the industry is still getting back on its feet, to support the sector, the FM has announced a package of Rs 2,400 crore to develop the sector on a mission mode. Furthermore, 50 cities have been proposed to be developed from a tourism perspective through a challenging process that will further aid domestic and international tourism. In addition, the development of 50 additional airports, helipads, and water drones will improve regional connectivity, thus providing more development opportunities.
Building Ecosystem for Efficient Movement
India’s logistics cost is about 14 per cent of GDP as compared with 8 per cent of global economies. The FM announced a massive push for the logistics sector by introducing the Gati Shakti programme last year. This year, the government has re-emphasised that the push to develop critical infrastructure for transportation (100 projects) is crucial for the overall economy. The thrust on the development of the logistics sector will help in improving the profitability’s of FMCG companies, as well as e-commerce.
Uplifting Rural Bharat – Sabka Saath Sabka Vikas
The Budget provides a massive push to rural Bharat by providing INR 20 lakh crore agricultural credit system for animal husbandry, diaries, and fisheries. This will boost the rural economy and provide more job opportunities. The government has a clear vision of doubling the farmers’ income. One of the major initiatives the government aims to drive for farmers is the digital public infrastructure for agriculture.
This will enable inclusive, farmer-centric solutions through relevant information services for crop planning and health, as well as improved access to farm inputs, credit, and insurance. This, in turn, will further help with crop estimation, and market intelligence and support the growth of the agri-tech industry and start-ups. Apart from this, the agriculture accelerator fund will encourage start-ups in rural areas. It will boost the production of high-value horticulture crops and sustainable farming. The move is forward-looking and will positively give an impetus to the overall consumer space.
Overall, it is a positive budget that focuses on the growth of rural Bharat, which is the main base for the consumer and retail segment. We sincerely hope that the implementation of the budget announcements will give demand the requisite stimulus for enhancing consumption growth for the sector.
(The author is partner and consumer leader at Grant Thornton Bharat)
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