Companies in the rapidly evolving consumer goods sector are looking for ways to increase consumption

Companies in the rapidly evolving consumer goods sector are looking for ways to increase consumption

“We would recommend that the government should introduce measures to ensure more money is left in the hands of the salaried and middle class to accelerate consumption and demand,” said a CavinKare spokesperson. The companies also expect steps by the government to boost the rural economy, which slowed in the quarter gone by, after being a driver of FMCG growth and outperforming urban markets since the onset of the pandemic.

Fast moving consumer goods (FMCG) businesses are requesting the Union Government’s intervention in the next Budget to promote consumption in the economy, as they struggle with rising inflation and sluggish rural demand. Top executives at Hindustan Unilever (HUL), Parle Products, Emami, and CavinKare are anticipating a flurry of announcements, including an increase in the outlay under the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) and a tax cut for the salaried class, which will aid demand regeneration. “The expectation is that the government will put money in the hands of consumers to ensure that demand is not harmed.”

While addressing a post-earnings virtual briefing, HUL Chairman and Managing Director Sanjiv Mehta said the government needs to increase the outlay under MGNREGS and continue with its other schemes such as direct cash transfer, food subsidies which have supported the rural areas of the country even as COVID-19 wreaked havoc in urban areas. HUL had flagged signs of a slowdown in the hinterlands of the country in the September quarter, and said the demand in these areas weakened in the December quarter. “Though the headline value growth is still there in rural India, the volumes growth has turned negative,” said Mehta.

FMCG companies draw a large share of their sales from rural regions and a hit on demand in these areas has a direct impact on their sales. Emami, which houses brands such as BoroPlus Navratna and Zandu and commands a major share of its sales from rural India, too, hopes the government would bring out a growth-oriented budget.

“Budget 2022 is going to be another challenging one, in which the government will have to balance between the growth and the necessities of the economy. Being again a year of elections in five important states, populism and socialism are expected to take prominence. Amidst this, we expect a budget which can drive post-pandemic steady growth,” said N H Bhansali, CEO-finance, strategy and business development, Emami Limited.

“Focus should be on infrastructure, start-ups, healthcare, and renewable energy among others. While GST and direct tax have been streamlined over a period, a few more initiatives like moderating the highest slab in individual taxation in line with corporate tax, honouring the commitment of fiscal benefit in the North-East where benefits are being denied on flimsy grounds are expected to be regularised,” he added.

Shah of Parle Products also believes initiatives towards job creation would also help in demand generation in the economy. “The other expectation would be to increase the disposable income through employment. Job creation can be brought about by increasing the spending on infrastructure. Across urban and the rural markets, increasing the spending on infrastructure would result in higher job creation, which will be positive for different sectors,” he added.

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