Marking her seventh consecutive presentation, Finance Minister Nirmala Sitharaman presented the Budget for the FY25, under Prime Minister Narendra Modi’s third term. Highlighting the stability of the country’s inflation rate (approaching the target of 4 percent), she noted that the core inflation rate currently stands at 3.1 percent.
Focusing on income tax reforms, enhancing business ease, increased focus on public infrastructure, and a special focus on MSMEs, the Budget came bearing good news for the retail and consumer sector, penning a positive story for rural consumption.
The retail sector seems optimistic about the 2024 budget, seeing significant opportunities for growth and expansion.
Anand Ramanathan, Partner and Consumer Products and Retail sector Leader, Deloitte India, said that the budget focuses on important areas such as climate-resistant seed variety distribution, scaling digital public infrastructure and natural farming which will improve farm-level productivity.
“Mission for self-sufficiency in pulses, encouraging shrimp production and focus on vegetable production clusters will help in aligning production to emerging changes in consumption of fresh produce and proteins,” he said.
Aasif Malbari, CFO, Godrej Consumer Products, notes that the Budget promises holistic growth of India’s macroeconomics at the grassroots level. Investments in job creation, skill upgradation, and MSME development will support more inclusive economic growth. The special focus on agricultural schemes and rural development will indirectly boost consumption spending, particularly in rural and non-metro markets.
The government’s focus on employment generation and skilling initiatives is expected to boost consumer spending power. The sector anticipates increased demand for goods as more people enter the workforce and benefit from employment-linked financial improvements, said Mahesh Gupta, CMD, Kent RO Systems
The budget’s emphasis on manufacturing and services aligns well with the retail industry’s goals. The new scheme incentivising job creation in the manufacturing sector, with EPFO contribution reimbursements, is likely to benefit retailers by ensuring a steady supply of goods. This, he added, could lead to increased availability of products and potentially lower costs for consumers.
The sector also welcomes the government’s push for innovation and R&D, which could drive technological advancements in retail operations. The focus on energy security may lead to the development of more energy-efficient products, appealing to environmentally conscious consumers.
Mohit Malhotra, CEO, Dabur India, believes that the Budget’s push on urban and rural growth will help boost rural consumption and also increase discretionary spending. Urban Housing needs of 1 crore urban poor and middle-class families are being addressed with an investment of Rs 10 lakh crore. “The government’s decision to allocate Rs. 2.66 lakh crore for rural development, including rural infrastructure, and its continued focus on rural infrastructure development are big steps in the right direction. These measures would further boost consumer sentiments in the hinterland, which is already showing green shoots of revival,” he says.
The Finance Minister has also facilitated more disposable income to drive demand through changes in the tax regime, including a higher standard deduction which has gone up from ₹50,000 to ₹75,000 for the new tax regime. Additionally, there is a provision for a higher deduction under NPS accounts, increasing the employer contribution from 10% to 14% for the new tax regime.
Mayank Shah, Vice-President, Parle Products, highlights that the government’s strategy appears to push taxpayers to move towards the new tax regime by revising tax slabs, which means higher slabs of taxes are applicable at higher income levels if no deductions are taken.
“With this adjustment, we expect consumers to spend more because they would have higher disposable income in their hands. Ensuring that there would be a good increase in demand for goods as a result of higher disposable income in the hands of consumers. Another significant highlight of the budget is the emphasis on creating employment,” he says.
The budget gave special attention to MSMEs (micro, small, medium enterprises) with a new mechanism announced for facilitating continuation of bank credit to MSMEs during their stress period. The limit of the Mudra loans also increased from Rs 10 lakh to 20 lakh.
Additionally, financial support for 50 multi-product food irradiation units in the MSME Sector.
The FM also announced e-commerce export hubs to be set up in Public-Private Partnership (PPP) mode to enable MSMEs and traditional artisans to sell their products in international markets.
Ramanathan of Deloitte said that the focus on e-commerce hubs will help the D2C ecosystem including small vendors and aggregators to bring in greater efficiency in their operations and improve accessibility to markets including exports.
Comprehensive approach towards agriculture and rural development
The allocation of Rs 1.52 lakh crore for agriculture and allied sectors, alongside the release of 109 high-yielding and climate-resilient crop varieties, marks a significant advancement.
Angshu Mallick, MD and CEO, Adani Wilmar, says that the the focus on rural development, self-sufficiency in crucial crops, vegetable clusters, and improved digital infrastructure is particularly encouraging. These measures promise to optimise the agricultural value chain, boosting efficiency and competitiveness.
“The Digital Public Infrastructure (DPI) initiative, starting with a digital crop survey for Kharif in 400 districts, will stabilise rural economies and ensure 6 crore farmers and their lands are registered, facilitating the issuance of Jan Samarth-based Kisan Credit Cards. This budget sets a promising trajectory for the agriculture sector and rural economies, aligning with our mission to foster sustainable growth and prosperity in rural communities,” he adds.
According to Manish Aggarwal, Director, Bikano, the initiative will enhance supply chain efficiencies and reduce agricultural wastage, which are critical for the sector. The plan to initiate 1 crore farmers into natural farming with support for certification and branding is another commendable step.
Moreover, the comprehensive review of the agricultural research setup promises to increase productivity and develop climate-resilient varieties, overseen by domain experts to ensure relevance and effectiveness.
The substantial provision of Rs 2.66 lakh crore for rural development and the Rs 26,000-crore boost to road connectivity projects are also welcome moves. These efforts will greatly improve market access and distribution networks, facilitating better reach for FMCG products in rural areas.
However, he added, that they industry had hoped for more aggressive measures in terms of income tax reforms and increased grants to spur consumer spending and innovation.
“While the focus on rural infrastructure and agriculture is crucial, additional support through enhanced Employment Linked Incentives (ELI) and Production Linked Incentive (PLI) schemes was necessary to further bolster India’s manufacturing sector. Continued emphasis on these areas would have provided a more holistic boost to the FMCG industry,” he remarked.
That apart, experts said that the establishment of 10,000 need-based bio-inputs units will support the area under organic farming, which has increased at a compound annual growth rate of 23 percent between 1990 and 2023.
FM Sitharaman also announced that the government will provide Rs 11.11 lakh crore towards capex for FY25 and it would maintain strong fiscal support for infrastructure projects for the next five years, while launching Phase IV of PM Gram Sadak Yojana in 25 rural habitations.