Union Budget 2022-2023: Here’s how FMCG brands reacted to the budget

• Finance Minister of India Nirmala Sitharaman presented the Union Budget on February 1, 2022.
• Struggling with high inflation and tepid rural demand, FMCG companies were hopeful for some positive news, steps and reforms that would help boost consumption in the economy.
• However, with no changes in personal tax, there isn’t for hope for a drastic change in consumption and demand.
• At the same time, there are enough subsidies to support the rural areas of the country.
• Here’s what leading FMCG companies have to say about the Union Budget 2022-2023.

The Union Finance and Corporate Affairs Minister Nirmala Sitaraman presented the Union Budget for 2022-2023 on February 01, 2022. The government announced that 5% of the annual collections under the Universal Service Obligation Fund will be allocated to improve broadband and mobile service penetration in rural India. This move will allow Fast Moving Consumer Goods (FMCG) brands and all businesses to cast their net a little wider in rural areas via mobile services.

The government’s plan to expand the National Highway network by 25,000 KM, the Gati Shakti plan to strengthen seven engines of infrastructure, the launch of 100 new cargo terminals, will further open up new roads for brands and improve logistics efficiency. It will also create new job opportunities in rural areas, improving consumption and demand.

The finance minister also mentioned that the government intends to pay ₹2.7 lakh crore worth of minimum support price (MSP) direct payments to wheat and paddy farmers. The government is also looking to deploy drones for agriculture monitoring, crop assessment, digitisation of land records and spraying of insect pesticides. These initiatives will help boost rural incomes and aid the growth of FMCG companies.

The Union Budget aims to facilitate ease of doing business and give a push to consumption by providing employment opportunities, improving infrastructure, focusing on technological advancement and accessibility.

Here’s how these subsidies for rural India will pave the way for FMCG growth:

Mayank Shah, Senior Category Head, Parle Products:

First of all, putting money in the hands of consumers really helps, so they go out and buy products. So that was more on the front of ensuring that the demand remained robust given that we have gone through two years of pandemic. That was something that industry expected, either by tax cut, or by increasing the slabs tax brackets or by probably increasing the standard deduction limit. Those were the things that we expected but not much has been done there.

However, on the second front of job creation, the government has done a lot. The budget talks about seven engines driven by PM GatiShakti that will definitely boost employment and increase the number of jobs. The budget also talked about 60 new jobs to be created in the next five years. That is relatively a longer process compared to the first expectation which was putting money in the hands of consumers, which would have yielded immediate results. A 20,000 crore boost in transportation infrastructure will definitely help in terms of job creation going forward.

Another thing the government would have ensured on the rural front was increased allocation to MGNREGA or direct benefit transfer. In Fact they chose the other way. In terms of rural demand, when you're talking about putting money in the hands of rural consumers by increased MSP and increased MSP allocation, it is also going to have an impact on the inflation because if you increase the MSP, that eventually is going to increase the cost of agri products, primary inputs in food processing. So procurement is going to be increased. The current challenge ahead of most FMCG companies, which is managing inflation, probably would be aggravated, so I consider it to be neutral. Probably placing this money in the hands of consumers through MGNREGA or DBT would have ensured demand to remain robust.

Ahmed ElSheikh, President, PepsiCo India:

Reviving economic growth, increasing consumption, and fostering investment to fuel post-pandemic growth have been key objectives for the government, and the Union Budget 2022 reflects this very intent. This year's Union Budget lays forth a vision for India at 100 years. The Government is leading from the front by raising public sector spending to keep the economic recovery on track. Digitization combined with infrastructural creation will accelerate economic development, stimulate innovation and entrepreneurship enhance living standards while keeping sustainability at its core. The increased outlay for PM Gati Shakti projects for multi-modal connectivity including 100 new railways logistics hubs coupled with steps like enhancing local oilseed production, extending the last date for starting production for new manufacturing units, encouraging alternate cropping will aid growth of the FMCG sector and further strengthen Govt’s vision of an Atmanirbhar Bharat.

Saugata Gupta, MD and CEO, Marico Limited:

With this Union Budget, the government has laid out a growth oriented, future focused blueprint for India. By prioritising job creation, infrastructure growth and strengthening digital capabilities while making ‘inclusive development’ and ‘financing of investments’ two of the key focal points of the Budget, the government is successfully laying the groundwork for faster financial inclusion and expansion of the credit ecosystem.

It has undertaken some key initiatives targeted towards credit growth, farmer welfare, improving the health and education infrastructure, digital currencies and start-ups which will benefit young aspirational Indians. If executed well, the budget will trigger the virtuous cycle of economic growth and employment creation, leading to momentum in growth. I believe that the budget has several inclusive measures and policies that balance consumer needs with industry requirements. It encapsulates the spirit of an Atmanirbhar Bharat and takes strong steps towards fulfilling that vision.

Venkatesh Vijaraghavan, Director & CEO - FMCG, CavinKare:

We welcome the futuristic, investment-led, growth-oriented Budget with a strong impetus to infrastructure and capability building, which would boost GDP, Atmanirbartha, economic stability and job creation, thereby reaping demographic dividend.

Ghanshyam Khandelwal, Chairman, BL Agro:

The budget was as expected. We didn't anticipate the industry to take centre stage because several schemes for the FMCG sector have already been implemented in recent years. However, the mention of a rationalised strategy to improve domestic oilseed production and minimise reliance on imports was welcomed.

A more promising statement was the package that centers on farmers adopting appropriate fruits and vegetables, as well as proper harvesting practices. The move will go a long way towards uplifting the food processing sector.

Harsha V. Agarwal, Director, Emami:

A very forward-looking budget with focus on capital expenditure which should drive growth. The ease of business in India has also been prioritised. So over all the budget pulls no surprises and focuses on growth of the Indian economy.

Amrinder Singh, Director, Bonn Group of Industries:

As the social security benefit of state and central government employees has been enhanced in this Union budget 2022, we are expecting that it will spur the consumption. The government has put money in consumer’s hands and ensured that the demand is not getting affected by increasing the tax deduction limit by 14 percent of the state government employees.

Vikram Agarwal, Managing Director, Cornitos:

The Union Budget 2022-23 is a progressive budget, our Government is concentrating on infrastructure, employment generation, and future developments. This appears to be a growth-oriented budget as efforts are being made to reduce compliance burdens and improve ease of doing business. The Budget has given an extension of the ECLGS Scheme which would provide much-needed help to the MSME sector especially the hospitality and related food processing segments. The past few years have been tumultuous for the hospitality segment and I am hopeful that this initiative gives the industry a much-needed boost.