Union Budget 2024: FMCG Companies Expect 'Progressive & Transformative Measures' As we look ahead to the Union Budget 2024, FMCG firms anticipate measures to drive sustainable, inclusive growth and address inflation
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Post the Interim Budget in February, fast-moving consumer goods (FMCG) companies celebrated the announcements, which the industry believed signified a long-term push for the economy. The FMCG sector remains optimistic and anticipates a more stable market in 2024. With the upcoming Union Budget 2024, the expectations are high for progressive and transformative measures.
"As we look ahead to the Union Budget 2024, we anticipate measures that will drive sustainable, inclusive growth and address inflation. With the new government in place, there's an opportunity to focus on long-term, inclusive development. The recent green shoots in rural demand, especially in the FMCG sector, underscores the potential of these markets, fueled by improved infrastructure, electrification, and digital connectivity," said Aasif Malbari, CFO, Godrej Consumer Products.
The Indian consumer industry is expected to grow rapidly and become the world's third-largest by 2027, behind the US and China. India, one of the largest retail markets in the world, is expected to grow to US$1.41 trillion by 2026, according to a consumer industry analysis by Deloitte.
The business landscape is changing and experience has emerged as an important factor influencing consumer preferences. While India's consumer industry has grown exponentially due to the country's growing young population and relatively progressive purchasing power, there is still disparity in consumption between urban and rural areas in the country.
"The budget should prioritize rural job creation, incentivize capital expenditure, and promote innovation. In line with the India@100 vision, substantial resources should be allocated to support exports and job creation in both rural and urban sectors. This will enhance local production and build a resilient, inclusive economy," the CFO added.
For FMCG companies, expanding rural outreach through direct distribution and engagement strategies will be crucial. By addressing the evolving needs of rural consumers, companies can drive growth and contribute significantly to India's overall economic resilience.
"Due to a high rural unemployment rate and slow growth pace, expectations from the government to push rural demand include increasing Minimum Support Prices (MSP) for agricultural produce, making sustained investments in rural infrastructure projects, ensuring efficient implementation of Direct Benefit Transfer (DBT) schemes and promoting robust crop-sowing practices," said Anand Ramanathan, partner and consumer, products and retail sector leader, Deloitte India.
The government's focus on capital expenditure and private-sector manufacturing service activity should support income generation and boost economic activities. The focus should be on the local implementation of government policies. "This is set to create a conducive environment for good crop production to match demand, keep prices in check and strengthen rural demand. The government could continue focusing on rural housing schemes or allocate a good amount towards improving rural infrastructure to drive consumption," Ramanathan added.
Recognizing the importance of rural economies, companies emphasize the need for schemes to boost rural consumption, fostering a stable market. "We also anticipate policies to protect oilseed farmers and the oleochemical industry. Additionally, we expect the government's focus on capital expenditure, private-sector manufacturing and services to drive income generation and economic activity. Increasing funding for the agriculture accelerator fund is crucial for improving farming practices through new technology with better storage solutions, benefiting both farmers and the FMCG sector," said Manish Aggarwal, director, Bikano, Bikanervala Foods.
Employment generation programs and skill development initiatives tailored to rural youth can diversify income sources, reducing dependency on agriculture and increasing purchasing power. Strengthening healthcare and education facilities will lead to a more productive workforce, benefiting the overall economy and creating a more robust consumer base for FMCG products. Immediate measures such as launching targeted agricultural programs, expanding rural banking services and enhancing social safety nets will help stabilize rural economies and boost consumption of FMCG goods in these regions, Aggarwal explained.
Consumer protection is becoming increasingly vital for the government and industries. The growing young population and a burgeoning middle class, concentrated in urban hubs, are the key forces driving this growth. The middle class is the main driver of consumer demand and expenditure. Companies seek solutions to immediate economic challenges and initiatives for sustainable growth, including proactive measures to control inflation, stimulate overall consumption, and incentivize capital expenditure, innovation, research and development. After the pandemic, challenges emerged in the form of high inflation. This caused commodity prices to soar to multi-decade highs in many countries, prompting central banks to increase interest rates and restrict economic activity. High inflationary conditions affected consumer behavior, making people more frugal with their spending. Consequently, this led to a slowdown in the consumer goods industry.
The government's focus has been to simplify the tax structure and rationalize provisions. Moreover, there is a need to provide certainty and visibility to taxpayers by clarifying ambiguous provisions and offering incentives to boost investments. "The introduction of alternative dispute resolution mechanisms, such as Safe Harbour and APA, have strengthened trust between the government and foreign businesses investing in India. An improvement in India's consumer inflation index will be a directly visible measure. Consumer inflation has been trying to correct itself for the past three quarters. However, it has become difficult to contain the rising," explained Ramanathan.
