The Finance Minister has highlighted agriculture and rural sectors as two of the nine pillars of this year’s Union Budget. The provisions for this year’s budget are expected to revive rural consumption, which has been subdued for the past two years primarily due to poor monsoon and untimely rains, and has had a detrimental effect on overall consumption across all sectors in the last 2 years.
The move to create a unified agricultural market e-platform will benefit food-based FMCG companies, as this is expected to make procurement processes easier and more transparent, when compared to the APMC route. In addition, the permission for 100 per cent FDI in the marketing of food products is expected to bring in more investments into the food processing sector, especially the downstream supply chain, as well as allowing foreign multi-brand retailers to set up food-only retail stores.
With almost INR2,18,000 crore allocated for both roads and railways in FY 16-17, physical linkages are expected to improve significantly, which will help expand distribution across India, especially in to rural markets, and will also reduce transit losses by improving connectivity.
There were no significant announcements on FDI in retail, which was expected considering that the government in November 2015 had announced significant changes to the FDI policy.
The additional excise duty on unmanufactured tobacco and cigarettes is expected to negatively impact the organised tobacco industry further.
Authored By: Rajat Wahi, KPMG