NEW DELHI: The Union Budget has many takeaways for the agrarian economy. Finance Minister Arun Jaitley not only focused on improving farmer’s income in this year’s budget but also gave them the much-needed relief by increasing the minimum support price (MSP) for all upcoming kharif crops to 1.5 times the cost of production. These measures—bundled with other rural economy-related announcements—are expected to boost the purchasing power of farmers and increase consumption.
Mansoor Ali, Chief Sales & Marketing Officer, Hamdard, said, “Any boost to the rural sector plays a crucial role for the FMCG sector. The decision to enhance rural demand and emphasis on farmers is a welcome move. Overall, I believe that this Budget will help in constructing the long-term prospects of the country’s consumption story, especially in rural, semi-rural markets.”
Analysts expect that companies such as ITC, HUL, Dabur, Marico and others—which have a vast rural presence—will benefit from the Budget. However, there might not be any immediate rise in demand.
“We do not expect any immediate impact on consumption, either negative or positive. There is no real additional money in the hands of the middle class with which consumption can improve. However, the basic necessities of the poor in the country will be met because of various schemes announced, Overall, the Budget is pro-poor, and one with a long term impact with no immediate benefits for retail sector,” said Kumar Rajagopalan, CEO, Retailers Association of India.
Experts say stagnancy in rural consumption in the past two years, mainly due to below average rainfall, can be overcome by increasing purchasing power of the rural population. A good monsoon in 2017 set the tone for revival in rural consumption as companies are seeing increase in demand in the last two quarters.
“This budget will improve the livelihood and disposable income in the hands of masses, especially in rural India,” said Saugata Gupta, MD & CEO, Marico Ltd. “This in turn will help the consumer goods sector acquire new consumer franchise in the long run. Improved infrastructure will also help ease of doing business and lower cost of operations.”
Dairy industry thumbs-up
The dairy industry welcomed the Budget saying allocation of R10,000 crore fund to fisheries, animal husbandries and related infrastructure will help it in upgrading and modernising milk procurement, processing and marketing. Textile, footwear and leather industries are expected to benefit from the Budget