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Increased expenditure on rural economy to generate demand for FMCG sector

Author: IANS/Saturday, February 3, 2018/Categories: FMCG & Retail

Increased expenditure on rural economy to generate demand for FMCG sector

By Porisma P. Gogoi 

New Delhi, Feb 3 - The government's move to increase expenditure on food processing, infrastructure, healthcare and rural economy will generate more demand for the fast moving consumer goods (FMCG) sector, said industry players.

"The country has been through two muted years of growth after economic reforms like demonetisation and GST (Goods and Services Tax). Hence, from the Union Budget 2018-19, expectation was to see policies and steps to boost growth," Harsha V. Agarwal, Director, Emami said.

"Infrastructure, education, healthcare and rural economy are the major beneficiaries from this budget, signalling more job creation and spending power in the hands of the largest population which will automatically help the FMCG sector by generating strong demand," Agarwal said.

The various measures announced by the government will lead to increase in rural consumption, improve overall rural economy and have a trickling effect on the corporates, according to Sanjana Desai, Head of Business Development, Desai Brothers (Food Division - Mother's Recipe).

Desai Brothers owns and manages the brand Mother's Recipe -- a food company which makes a vast range of pickles, pastes and ready-to-cook mixes.

"The Union Budget 2018-19 is largely positive for FMCG. As anticipated by the FMCG sector, government's thrust on boosting the rural economy is welcome," said Desai.

"Increased allocation under various schemes such as MNERGA (Mahatma Gandhi National Rural Employment Gurantee Act), rural infrastructure and others will not only increase rural income through employment generation by these projects but will also improve connectivity giving a boost to rural/agri businesses," she added.

In the last full budget just presented by Finance Minster Arun Jaitley before the 2019 general elections, the government announced that it would spend more on agriculture, livelihood and infrastructure in the rural area and increased funds for crop insurance, rural roads, irrigation besides setting higher targets for farm credit.

With total budgetary outlay of Rs 2,01,933 crore for agriculture and rural development, the government has emphasised on development of food processing, dairy and fishery sectors to enhance farmers' income.

The industry players also appreciated the Finance Minister's move to reduce the corporate tax rate for all companies with turnover of up to Rs 250 crore, up from Rs 50 crore.

"We welcome government's move to reduce corporate tax from 30 per cent to 25 per cent for companies with revenue of up to Rs 250 crore. This initiative will give a boost to company revenue and allow businesses like us to invest more in expansion leading to employment generation, which is a primary focus for the government," said Oliver Mirza, Managing Director and CEO, Dr Oetker India.

Dr Oetker India is a German packaged food company which acquired the Fun Foods brand in 2008.

"This move will also provide a great stimulus to the government's initiatives like ‘Make in India' and ‘Startup India'. Tax benefits combined with increased allocation to the food processing sector will give a great impetus to the overall FMCG industry," Mirza said.

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