Budget 2024: Focus On Rural Development, Job Creation Fuels Optimism For FMCG Companies

Even as the Union budget did not provide the much-anticipated direct cash transfers to rural consumers, India's fast-moving consumer goods industry is hopeful that an increased focus on job creation, higher infrastructure spending as well as tweaks in personal income tax will spur consumption.

"The government's focused interventions in employment generation, infrastructure and rural development will have multi-year effect in driving consumption," said Rohit Jawa, chief executive officer and managing director, Hindustan Unilever Ltd., during a post-earnings media briefing.

Dabur India Ltd. CEO Mohit Malhotra stated that the potential annual savings of Rs 17,500 resulting from increased standard deductions and revised rates under the new tax regime will provide consumers with greater disposable income, thereby fostering sustained demand. He added that a higher allocation for rural development will boost consumer sentiment in the hinterland, which are already showing green shoots of recovery.

"One can expect this year's budget which emphasises on key aspects including job creation, skilling youth, supporting the middle class to result in increased savings for consumers, a conducive environment for spending, improved lifestyles, and greater prosperity for the country," according to Krishnarao Buddha, senior category head, Parle Products Pvt.

Consumer sector analysts contend that the direct tax reduction and the monetary incentives provided to first-time employees primarily promote urban consumption and therefore, discretionary consumption could see some boost. "New schemes or sharp increases in existing schemes that would incrementally put money in the hands of the rural consumer were elusive," according to Harit Kapoor, lead consumer analyst, Investec India.

He expects higher earnings from construction activities, driven by greater infrastructure spending to put more money in the hands of rural population, but the resulting increase in demand will manifest gradually.

Presenting her seventh budget on Tuesday, Finance Minister Nirmala Sitharaman announced a whopping Rs 2.66 lakh crore provision for rural development, including rural infrastructure, among nine focus areas of policymaking.

Some of the other indirect schemes that can potentially enhance consumer spending and financial stability include:

• Three schemes linked to employment generation as well as another three for skilling and internship. The government envisages an outlay of Rs 2 lakh crore over the next 5-6 years.

• To invest Rs 10 lakh crore to address the needs of 1 crore urban poor and middle-class families.

• The government has retained budgetary allocation for infrastructure at Rs 11.1 lakh crore, which is 3.4% of GDP.

• Allocated Rs 1.52 lakh crore for agriculture and allied sectors.

• Standard deduction proposed to increase to Rs 75,000 from Rs 50,000.

• The size of each of the slabs under new tax regime has been changed, excluding the initial zero to Rs 3 lakh and above Rs 15 lakh.

The budget also focuses on important areas such as climate-resistant seed variety distribution, scaling digital public infrastructure and natural farming which will improve farm-level productivity, said Anand Ramanathan, partner and consumer products and retail sector leader, Deloitte India.

"Mission for self-sufficiency in pulses, encouraging shrimp production and focus on vegetable production clusters will help in aligning production to emerging changes in consumption of fresh produce and proteins," he said.

As the fiscal progresses, all eyes will be on how effectively these budget provisions translate into tangible outcomes for both consumers and businesses alike.