in the FMCG industry India Recovery continues as consumers return to their normal routines. According to NielsenIQ’s FMCG Snapshot for the second quarter of 2022, the FMCG industry grew by 10.9% in the quarter ending June 2022, as against 6% in the previous quarter.
With Budget 2023 just a few days away, there are some expectations from the industry, which sees the sector as one of the most important industries that traces its chain from rural India.
Rural demand is likely to improve with food and overall inflation likely to remain in the range of 5-5.5 per cent in 2022 as compared to 6.8 per cent. Low inflation will support rural demand.
according to a monocontrol Report, in 2023, rural demand will pick up strongly, urban demand will remain stable and grow with a positive bias, volume growth will replace value-led growth, and more importantly, the sector will see margin recovery .
Meanwhile, industry experts and FMCG players are optimistic about the budget and expect some initiatives from Finance Minister Nirmala Sitharaman.
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Krishnarao Budha, Senior Category Head, Parle Products, said, “The Union Budget 2023-24 should boost investment to accelerate and balance the economic recovery in the markets. Greater focus on programs aimed at increasing employment opportunities will boost the rural economy and in turn increase their purchasing power.”
Budha said that for the FMCG sector, a balanced rural development is of utmost importance for inclusive growth.
Growth in infrastructure and technology are also key areas to recover from the effects of the pandemic.
“With these initiatives, the government should focus on catalyzing ease of doing business. With a continuous cycle of accessible disposable income and job creation, consumer confidence and access to credit and markets will grow; These efforts collectively can further propel the FMCG growth engine,” Budd said.
Experts such as Manish Agarwal, director, Bikano, Bikanervala Foods, also feel that through policy measures, the budget ensures that there is a revival of demand in the economy, especially rural demand which has been somewhat weak this year.
Aggarwal said, “Apart from stimulating rural income generation in various ways, higher capital expenditure will also be needed to address post-pandemic supply chain bottlenecks and improve long-term supply chain capacity in hinterland markets “
Elaborating on the possibility of a possible recession in the West in the coming months, Agarwal highlighted that there is a need to stimulate consumption expenditure in the larger domestic economy.
Even though commodity prices are showing signs of softening, some raw materials and critical inputs especially for the food FMCG segment need to cool down. The predictability and stability of input prices is important for any sector including the FMCG sector and the budget must ensure this, urged Agarwal.
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The budget should also address rising prices of various packaging materials, which is again important for FMCG as packaging typically contributes around 10% of the input prices of an FMCG product.
Agarwal also demanded that the government should reconsider contract farming, allowing a more balanced risk-sharing arrangement between farmers and industry with adequate safeguards for farmers. While this will ensure assured price to the farmers, there will also be availability of inputs and materials of exact desired quality and type to the FMCG players.
Concluding on expectations, Agarwal urged that the government may consider rationalizing GST rates on FMCG products in the coming budget as well as easing compliance rules and procedures, especially food safety and hygiene standards In relation to.
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