FMCG and Retail Sector Pushes for Budget Reforms to Boost Rural Demand

The fast-moving consumer goods (FMCG) sector and retail industry are calling for major modifications in the upcoming union budget to boost consumption and promote economic development. A report by Axis Securities emphasizes the importance of investing in digital infrastructure, improving skills, and aiding MSMEs to bolster rural demand.

The report highlights, "Investments in digital infrastructure, skill upgradation, job creation, and MSME development to indirectly reignite consumption and spending in the economy, especially in rural areas." These focused programs, combined with increased agricultural and non-agricultural earnings, might greatly boost the rural economy.

An increased emphasis on generating jobs and higher funding under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) is anticipated to boost purchasing power in rural regions. Furthermore, a rise in capital share in rural infrastructure and connectivity is expected to boost demand in neglected areas.

The sector also seeks urban growth, with greater emphasis on urban development projects and the services industry. The report suggests that this would generate jobs, boost urban demand, and enhance remittances.

One important suggestion is to adjust income tax brackets to increase disposable income for various consumer groups. Nonetheless, the industry has cautioned against rises in excise taxes or the National Calamity Contingent Duty (NCCD) on tobacco and cigarette items. "Revising income tax slabs will boost demand across consumer sectors. Raising Excise Duty or NCCD duty on cigarettes and tobacco products will be negative for cigarette companies," it noted.

Increased rural expenditures, subsidies for food and fertilizers, and a stronger emphasis on affordable housing are viewed as essential for maintaining economic growth and tackling inflationary challenges. If implemented, these measures have the potential to promote sustainable growth in both the FMCG sector and the larger economy.