2020 has been an unprecedented year, which was interesting, challenging yet enriching in many ways. It had far reaching impact on businesses and individuals, and FMCG business was no exception. There are some early signs of recovery and this need to be sustained in 2021.
In the post COVID world, we all are facing challenges of adapting to the new normal, so reviving economy should be the main focus of the budget.
“One of the key tasks of the Budget 2021 would be to fuel consumer demand and further revive the economy. The Government’s focus needs to be on increasing the rural spending and this will further boost rural consumption of FMCG products. Adequate investment in infrastructure, agriculture and social sectors will also further drive the pace of recovery,” says Rajesh Ramakrishnan, Managing Director, Perfetti Van Melle India.
The FMCG players are demanding stronger subsidies on import of capital goods used for core manufacturing and value addition for exports.
“The government should reduce long-term capital gains tax on private equity and making it at par with the public market. The budget can look into widening the ambit of special startup manufacturing zones for companies or startups which want to foray into manufacturing. This would give the Government's ‘Vocal for Local’ initiative a timely fillip,” states Bala Sarda, CEO & Founder VAHDAM India.
Boosting Consumer Demand
With COVID last year, FMCG sector saw an impact on the consumer demand. The Government should boost consumer demand by reduction of personal taxes leading to an increase in their disposal incomes. This would increase the consumerism and overall growth.
As per Nielsen report, Rural India contributes 36 percent to overall FMCG spends and has been growing 3-5 percentage points faster than urban spend in the past decade. Thus, government should focus on building infrastructure projects which would create more jobs and boost the consumption.
“With Atmanirbhar Bharat, the Government should promote local production and bring out incentives which would lead to self-reliant India. Also there should be a reduction in GST rates of products that are natural and healthy such as dates, almonds, etc," says Pankaj Mishra, CEO, Apis India.
Growth and Resilience from Pandemic
FMCG players hope this budget will be about measures to bring about growth and resilience from the pandemic.
“As we witnessed during the pandemic, a large part of this growth will be brought through bringing in the unorganised players to mainstream business and a key theme will be Offline to Online - O2O. O2O will lead to transparency in payments, transactions, compliance with taxes, labour laws and larger employment opportunities for the youth. Specific to e-commerce and e-grocery, we believe this is an opportune time for the government to try to rationalise GST rates, compliance processes, FDI policies and ride the buoyancy revenue curves to make it a win-win situation," Shan Kadavil, CEO & Co-Founder, FreshToHome shares.
Despite the immense adoption of technology, we have a long way to progress in terms of efficiencies to drive growth to the bottom of the pyramid.
"We are waiting to understand the Government's vision to boost opportunities for Indian businesses. From the food start-up sector perspective, we are into delivering fresh processed and ready-to-eat meat, therefore, we are expecting the Government to simplify policies and help with streamlining the supply networks. The Government has always been generous towards our sector however, considering the new innovative digital growth, we hope that it extends additional support towards our industry in terms of investment, expansion, and transformation apart from the policies,” states Siddhant Wangdi, Founder of Meatigo.com.
More Spending Power in Hands of Consumers
To position India as the food factory to the world and promote value added processed food products abroad, the 2021 budget should provide higher allocation of funds for food processing units and tax incentives for exports of food items.
“To facilitate investment in the food processing industry, any additional capital investment of more than 50 percent of existing book value of plant and machinery should be treated as new investment and should also be eligible for a five-year tax holiday, under section 80IB(11A), says Vikram Agarwal, Managing Director, Cornitos
"Government should reduce Individual Income Tax so that the individual spending increases. Currently, there is upto 47 percent income tax on Individuals and 18 percent GST on products, hence paying 65 percent taxes in totality. Secondly, GST categories in food products have not much clarity and don't cover all types of products. Government must make the GST categories vast and clear. Categories 1905 and 2106 have a lot of confusion and hence Industry is penalized by paying higher slab of GST Tax which can be reduced. We hope that the government will take measures to control inflation and take appropriate measures to reduce the surge in cost of raw materials," he further adds.
As the COVID-19 pandemic resulted in job-losses especially of rural consumers, FMCG players seek stimulus packages in the form of low income tax slabs, job-creation and incentives in this budget.
"Nielsen's data shows overall FMCG sales growth fell from 16.2 percent annually in the September 2018 quarter to 7.3 percent in the September 2019 quarter, with rural consumption at the slowest in seven years. Government should also announce some initiatives to strengthen paid-work support programs like MGNREGA and others so that rural people can have some disposable income to spend on their consumption pattern ahead of essentials. This move will no doubt promote consumerism but also will boost overall GDP growth. More finances should be allocated on building roads, housing and new factories, which will also generate income opportunities for our rural consumers and bridge the gap to have last-mile consumption,” states Amrinder Singh, Managing Director, Bonn Group of Industries.