Feb 3, 2020
Amplified spending on rural infrastructure, concessions for the farm sector, and an emphasis on job creation are expected to help spur demand for daily household products and groceries — a market that has already recovered strongly during the last quarter.
However, prices of some consumer electronics products such as refrigerators, air-conditioners and printers and discretionary items including hiking shoes, electronic toys, and imported frozen foods could increase marginally due to hike in customs duty on their raw materials.
Mohit Malhotra, chief executive of Dabur India, explained that higher allocation under rural infrastructure will hasten development and go a long way in improving penetration and helping drive consumption of FMCG products in the hinterland. Higher allocation under rural infrastructure will hasten development and go a long way in improving penetration and helping drive consumption of FMCG products in the hinterland.Finance minister Nirmala Sitharaman increased spending on rural infrastructure development by 34% to ₹40,000 crores and doubled micro-irrigation corpus to ₹10,000 crores among other measures that could help create jobs and boost farm incomes in the vicinity – home to more than 800 million people whose purchasing behavior is largely linked to farm output.
“The growing impetus should stay even as the bottom-of-the-pyramid urban consumers are still stressed,” said Saugata Gupta, managing director of Marico, which makes Saffola edible oil.
Ahmed ElSheikh, president, India region, at US beverages and snacks maker PepsiCo, said, “Sustained investments in overall infrastructure development, emphasis on asset monetization and efforts towards aiding startups will drive greater local innovation and value addition of which will push up consumer demand.”
According to consumer insights company Kantar, India’s fast-moving consumer goods market expanded 4.2% in the last calendar year, twice the rate in 2019, despite manufacturing and distribution hurdles in late March and April.
While customs duty increase on some components might lead to a marginal 1% increase in the prices of refrigerators, air-conditioners and washing machines, industry executives do not expect this to impact consumer demand.