Budget boost for Brands with large rural biz

For brands which derive a large portion of their business from India’s mammoth rural markets, Friday’s Interim Budget announcements were a shot in the arm.

Published: 03rd February 2019 11:34 AM  |   Last Updated: 03rd February 2019 11:34 AM   |  A+A-

Soumyadip sinha

For brands which derive a large portion of their business from India’s mammoth rural markets, Friday’s Interim Budget announcements were a shot in the arm. With a large portion of sops unveiled set to hand more disposable income into the hands of farmers and unorganised workers, brands in segments like mobile phones, fast-moving consumer goods (FMCG), automobiles, among others expect a boost to rural business. 

Among the measures expected to help drive consumption, two key schemes are set to put money into the hands of the rural population -- income support of `6,000 per hectare annually to small and marginal farmers and the new pension scheme for unorganised workers. With a full income tax rebate offered for taxable income up to `5 lakh, the urban middle class is also set to see more money in-hand to spend. 

For instance, Consumer Electronics and Appliances Manufacturers Association president Kamal Nandi, who is also business head and executive vice president of Godrej Appliances noted that the measures like rural electrification, which finance minister Piyush Goyal said would reach every household by end of March this year, would boost electrical product sales. “Coupled with infrastructural push via Gram Sadak Yojana and the rural support schemes, it will serve as a catalyst in improving the demand for consumer electronics and appliances. Category penetration levels should therefore improve faster,” he said. 

FMCG brands also have much to cheer about, with any increase in rural consumption set to be a growth driver, with sector major Marico’s managing director and CEO Saugata Gupta noting that given its focus on masses “this budget should place higher disposable income in the hands of a large section of the society which augers well for consumer goods sector in general and rural growth more specifically”. 

Even e-commerce firms are set to see some traction from the already burgeoning businesses in smaller towns. GLobal marketing major DCMN’s country head for India, Bindu Balakrishnan, notes that higher disposable income in the hands of consumers will enable more penetration for e-commerce brands. “It’s going to open up a parallel hitherto untapped consumer base for them, especially start-ups in the e-commerce industry and digital payments.From a common man’s perspective, especially those living in the Tier 3 and rural areas, whose choices were previously limited to products available locally, this would open up a new world,” she said, adding, “it looks like a win-win situation”. 

The markets’ reaction also reflected expectations on which brands were likely to benefit most. The BSE FMCG index gained 132.42 points, with several firms seeing sharp stock price increases, including JK Agri (5.65 per cent), Ruchi soya (4.94 per cent), Hatsun (2.76 per cent), Marico (2.6 per cent) and Britannia (1.65 per cent). 

Banking segment to gain too

With the announced income support to small and marginal farmers to be deposited directly into the Jan Dhan accounts of beneficiaries, sources in the banking industry say that this will ensure a steady stream of deposits into rural sector accounts, benefiting the banking industry too. The measure could help banks which have been seeing more growth in credit disbursement than  in deposits. For the current year to date, bank disbursements have grown faster than deposit growth for scheduled commercial banks

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