Budget will revive consumption, boost demand for FMCG sector

It is evident that Corporate India awaits the Union budget every year with tremendous anticipation. The measures proposed by finance minister Nirmala Sitharaman in the latest budget have fared rather well against these expectations. The nine-point agenda covering critical areas such as productivity and resilience in agriculture, manufacturing and services, infrastructure, inclusive human resource development and social justice, innovation and R&D, skilling and employment, and next-generation reforms has presented an elaborate road map for the future. The stability in capex estimates, retained at ₹11.11 trillion, as earmarked in February's interim budget, is also an encouraging development, highlighting the government’s commitment to accelerating economic growth and ensuring inclusive growth.

Focused measures for a Consumer-led economy

Given that the FMCG sector is one of the biggest drivers of economic growth and employment in India, the latest budget proposals – if effectively implemented – can have a profoundly positive impact on the broader Indian economy. The India@100 vision (Viksit Bharat by 2047) to turn the country into a much stronger, more resilient, and inclusive economic superpower certainly sends a powerful and inspiring message. Reviving consumer demand was given visible emphasis in this budget. The revision of the tax slabs and increase in the standard deduction to ₹75,000 are likely to enhance purchasing power and aid consumption among the salaried and middle classes. Even during the disruptions over the past few years, India’s rural markets have demonstrated resilience and continued to represent a considerable long term growth opportunity. 

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Hence, rural development and agricultural enhancement was expected to be high on priority. In response, the Budget entailed announcements of ambitious initiatives to promote agricultural activities and provide increased support to farmers. As much as ₹1.52 trillion has been set aside for agriculture and allied sectors; a significant percentage of this money is expected to fund agricultural research that not only improves farming yields but also helps in developing more climate-resilient varieties of crops. The government also aims to introduce 1 crore farmers across India to natural farming over the next 2 years, while ₹2.66 lakh crore have also been allocated for rural development initiatives.

The recent introduction of 109 high-yielding, climate-resilient seed varieties marks a significant advancement, poised to mitigate production volatility and stabilize prices in the medium term. This development is particularly vital given the rise in adverse weather events over recent years, which have adversely affected crop yields and fuelled food inflation. The establishment of digital agriculture infrastructure, including an annual digital crop survey and the mapping of farmers to land parcels, will also improve credit risk assessment and could increase formal credit penetration in agriculture from the current levels of 60%.

Special attention to MSME, manufacturing

Further, special attention has been paid to the MSME and manufacturing sectors in the latest budget. The government has earmarked up to INR 100 crore to introduce a guarantee fund, which will be used to offer credit guarantee schemes and term loans for machinery purchase without any collateral. It also outlined a technology support package for MSMEs and plans to have SIDBI open 24 new branches to serve MSME clusters.

Taking a bird’s eye view, I believe that the proposed policies and initiatives in this Budget address key issues that have a bearing on demand and consumption. With a multifaceted approach, the finance minister and the Government have shown their resolve to boost consumption across sectors and thereby bolster economic growth. If implemented well, we would see the positive effects of this, especially in rural markets, just in time for the festive season.

Saugata Gupta is managing director and chief executive officer of Marico Ltd.