FMCG, retail and auto see good business from Modi govt's last Budget

CEOs of FMCG, retail and auto companies say demand will improve as discretionary income will go up

Viveat Susan Pinto Shally Seth Mohile Mumbai

Last Updated : Feb 01 2019 | 8:47 PM IST

The Narendra Modi-led government's last Budget before it goes to the polls this year has brought a smile to the faces of most executives in the fast-moving consumer goods (FMCG), retail and auto sectors.

Friday’s interim Budget, announced by Finance Minister Piyush Goyal, has a slew of measures aimed at alleviating farm distress and improving income in the hands of rural and urban consumers.

Key sops include assured income for small farmers, a 50 per cent hike in minimum support price for all 22 crops cultivated by farmers, and a 2 per cent interest subvention for those in animal husbandry and fisheries. For the salaried class, there is no income tax for those earning up to Rs 5 lakh per annum, an increase in standard deduction from Rs 40,000 to Rs 50,000, while interest income up to Rs 40,000 is exempt from tax deducted at source.

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Company executives as well as experts say discretionary income will increase owing to these measures, resulting in higher demand for products in FMCG and auto. Motorcycles and scooters, in particular, which have hit the slow lane in the recent past, are expected to get a big push. Retail, on the other hand, is expected to see more footfalls in stores.

“This is a ‘consumption-first’ Budget that will give the FMCG sector a boost,” says Vivek Gambhir, managing director and chief executive officer (CEO), Godrej Consumer. “It re-emphasises the importance of the aam admi (common man) and will stimulate demand.”

R C Bhargava, chairman, Maruti Suzuki India, says, “This Budget doesn’t take anything away from anyone. There is no tax or levy that reduces people’s income. Instead, there are various proposals that add to people’s income, which is good. However, being an interim Budget, the sops may change when the final Budget is announced later in the year.”

Sunil Duggal, CEO, Dabur India, says, “The Budget promises to put more disposable income in the pockets of the middle-class. It also seeks to improve the quality of life of people at the bottom of the pyramid, which is important. What is also heartening is that the government’s commitment to long-term reforms remains. The decision to process income-tax returns within 24 hours and immediate payment of refunds are some steps that will create the foundation of a new India.”

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The Budget has proposed to incentivise small and medium entrepreneurs, says Duggal, by extending the benefit of a lower corporate tax (of 25 per cent) to companies with a turnover of up to Rs 250 crore from less than Rs 50 crore earlier. This will reduce tax evasion, he says, leaving companies with higher investible surplus. The benefits include a boost to job creation as well as consumption, since small and medium-sized companies, along with large players, will be aggressive in the marketplace.

Krish Iyer, president and CEO, Walmart India, says: “The Budget rightly focuses on the middle class and rural sector. Putting money in the hands of people will aid consumption. The Budget also helps bridge the divide between India and Bharat, which is key.”

Rakesh Sharma, chief commercial officer, Bajaj Auto, says, “With two-wheelers being a critical mobility provider, we expect it to reap benefits quickly, since the adverse impact of higher insurance and higher interest rate will be mitigated with higher disposable incomes. The segment should end the current financial year with a growth rate of 10-12 per cent.”

KEY TAKEAWAYS

The Budget has announced a series of measures to boost consumption

The middle class and farmers are at the centre of this, both of which are key for companies

Auto, FMCG and retail players say that disposable income will go up as a result, improving demand

This will result in higher sales growth for companies