India is poised to attain a remarkable, $850-billion status within the grocery and food retail segment by 2025, as per a Deloitte report. Given the immense potential of this sector, the government should revamp FDI policies, making them more attractive for investors and eliminating regulatory obstacles that have deterred foreign investors away, according to Anand Ramanathan, Partner and Consumer, Products and Retail sector Leader, Deloitte.
Currently, the government allows 100 percent FDI in food retail trading, including e-commerce, for food products manufactured and produced in India; this is subject to the government’s approval. Expansion to other products manufactured in India would make the sector even more appealing for foreign investors, thereby generating more investments in the value chain, Ramanathan shared.
He further added that the government should consider allowing 100 percent FDI in multi-brand retail trade at least for products manufactured in India, breaking down existing barriers to enable seamless growth and for harmonious coexistence of traditional and modern retail. In this regard, implementing a unified national policy is crucial.
Defining the regulatory framework for the last-mile delivery workforce is also crucial for the FMCG sector. Even though recruitment of temporary staff is going to increase, mainly in delivery, logistics, warehousing, sorting, and packing positions, gig workers encounter issues such as income instability, unpredictable hours, and the absence of crucial benefits, such as health insurance, retirement plans, and paid leave.The number of gig workers has risen steadily in metro and tier-1 markets and wherever e-commerce and hyper-local deliveries have expanded. Governments need to make efforts to acknowledge the gig workforce as a formal workforce under labour laws.
Amidst the ongoing economic challenges and supply chain disruptions, various FMCG heads are hoping for policy measures and incentives in the Union Budget 2024 to boost resilience and ensure growth.
Mayank Shah, senior category head, Parle Products, thinks the biggest challenge currently faced by most FMCG companies is the slowdown in demand, especially from rural India. “We are looking at more spending on infrastructure targeting rural India,” he said.
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Parle is looking at inputs from the government on various rural schemes, and expects a higher allocation to rural schemes. The FMCG major is also looking at some incentives from the government for the agriculture sector to ensure recovery of demand in rural India.
Given the heightened focus on health and wellness since the onset of the covid pandemic, FMCG companies have expectations from the budget in terms of support for innovation, research and development of healthier product offerings.
Shah thinks the government should be looking at healthier products differently, and offering incentives in terms of lower GST, or a lower tax rate on products targeted at health-conscious people or healthier alternatives compared to regular options available in the market.
“So, for example, if you look at millets, they have said that if your product has more than 70-75 percent of millets, you qualify for a lower GST, not 18 percent. I think the government should come up with various measures to boost healthier options and healthier products,” said Shah.
Sharing his vision for the Budget 2024, Aasif Malbari, CFO of GCPL (Godrej), said, “To support more inclusive economic growth the government could consider proactive measures aimed at future-controlling inflation and stimulating consumption in the larger economy.”
“A consumption boost will lead to a cycle of sustained economic growth in the long run. Furthermore, attention should be directed towards enhancing rural job creation and consumption, enhancing incentives for capital expenditure, and incentivising innovation and research and development (R&D),” he added.
“Aligned with the aspirations of India@100, the budget should also allocate larger resources to support exports and greater job creation in both rural and urban markets. This would boost local production and cultivate a resilient and inclusive economy,” said Malbari.
Angshu Mallick, Managing Director and CEO, Adani Wilmar Limited also highlighted that rural demand has been slower than expected. “Inflation has hit consumption. With higher expectations on the Rabi crop harvest, we anticipate rural demand to pick up. We recognise the vital role rural economies play in India’s economic growth and emphasise the need to introduce measures that would further boost consumption in these areas,” he said.
“New policies are anticipated that safeguard the interests of oilseed farmers and the oleochemical industry, while effectively addressing challenges faced by rural communities. This, in turn, will have a positive ripple effect on industries connected with rural landscapes. A thrust on capital expenditure would be welcomed, as it not only spurs economic growth but also ensures inclusive development,” Mallick added.
“A level playing field for manufacturers could be achieved by categorising imports such as palm oil, stearic acid, soap noodles, oleic acid, and refined glycerin under the restricted items list or implementing a 25 percent import duty on finished products as opposed to raw materials,” he said. Additionally, there should be duty-free import privileges for raw materials to entities equipped with processing facilities—this would stimulate innovation and boost competitiveness, thus promoting the Make in India movement, said Mallick.
“The proposed focus on bolstering investments in the Open Network for Digital Commerce (ONDC) and digital public infrastructure aligns with the ever-evolving landscape of consumer behaviour, ensuring our industry stays ahead in the digital age,” he concluded.
Amit Khatri, co-founder of Noise, highlighted the need for a robust framework for the startup ecosystem. “As we anticipate the upcoming Union budget, a robust regulatory framework fortifying the startup ecosystem and streamlined funds allocation alongside strategic efforts in technological advancements are crucial. A dedicated push to boost R&D and technological opportunities within the country will be pivotal in shaping India’s economic landscape and enhancing global investment,” he said.
“Initiatives such as the PLI scheme have been instrumental in boosting ‘Make in India’ efforts, and we believe the upcoming budget holds the utmost importance in further shaping India’s electronic manufacturing space. We hope for continued support from the government with a push for localising components as well, fostering an environment that encourages homegrown brands to lead India on the global stage, accelerating growth and enhancing our international prominence.”