It is again that time of the year when the budget is around as market players and investors make calculations based on their expectations. Every year, the budget is a keenly awaited phenomenon that decides the fate of each sector in the economy. This time, the budget comes at a time when the Omicron variant of the deadly Coronavirus has emerged, as economies try to remain calm and hopeful due to the ‘not so severe’ nature of the virus.
Nevertheless, the fast-moving consumer goods (FMCG) sector has high expectations from the Union Budget 2022 that is expected to be unveiled on February 1. As far as growth of the FMCG sector is considered, 2022 will be a year of hope as retailers would position their strategies and business models to flourish in the post-pandemic world.
How the FMCG Sector has been Performing Recently
The sector is undergoing a significant transformation in response to the changing consumer needs recently. To cater to the ever-increasing demand of the Indian consumer in the post-COVID new normal, retailers are now adopting technology and innovation to drive growth. The pandemic phase saw an accelerated adoption of omnichannel strategy and digitization along with e-commerce, to survive the unprecedented crisis. The trend is likely to continue this year as many FMCG companies are considering phygital retail and direct-to-consumer channels.
The FMCG industry saw a sharp recovery after the second wave of the deadly COVID-19 pandemic. However, concerns remain with the rise of omicron cases and a third wave lingering. Although perceived to be less severe than the delta variant, omicron is still very dangerous as it is more infectious than other variants of the virus.
Expectation from Budget
Low rural consumption remains a matter of concern for the FMCG industry, so any boost in disposable incomes, especially in rural areas, would spur consumption. Inflation and supply shortages in rural areas have dropped FMCG sales to some extent. Stimulus packages for rural support programs like MGNREGA can lead to some recovery.
If the pandemic situation becomes worse, businesses will be affected again, especially in rural parts. Stimulus packages and initiatives would help the FMCG companies gain the lost ground and expand their rural coverage. Also, focusing on agriculture or the farming sector in the budget will help increase rural consumption. Lowering raw material prices will be a high expectation from this budget.
FMCG Trends in 2022
The revenue in the FMCG sector will double from 5-6 percent in fiscal year (FY) 2021 to 10-12 percent in FY-22, as per CRISIL Ratings. With a revival in demand and consumption, FMCG companies are looking forward with hope in both urban and rural markets. The industry will continue to ride on the health and wellness wave to strengthen its core and drive growth.
Unprecedented levels of inflationary pressure due to the rise in the cost of raw materials remain a challenge before the industry and it expects the budget to make the path smooth for them.