Costlier oil and subsidy fall likely to hit consumption in FY23

A cut in subsidy in FY23 comes on the back of an equally sharp cut in FY22

The 2022-23 fiscal year could be tough for companies in consumer demand-related sectors, such as fast-moving consumer goods (FMCG), consumer durables and automotive, because of multiple headwinds, including cut-back in subsidies, higher oil prices, and rising interest rate.

The biggest headwind to the consumption story in FY23 is a sharp decline in government subsidies on food, fertilizer and fuel, and overall decline in revenue expenditure net of interest payments. This, analysts say, will adversely impact purchasing power of households at the lower end of the income pyramid, translating into lower spending on consumer goods & services.

The Union Budget for 2022-23 has