Budget 2024: Expectations of FMCG Sector from the Union Budget

FMCG sector is integral to India's economy including various products such as food, beverages, personal care items and household goods. These are everyday products that consumers purchase frequently and often without much deliberation.

After the 2024 Interim Budget, the industry is looking forward to more stability and hopes for measures that will bring progress and transformation. This includes policies and decisions from the government that could positively impact the sector boosting economic growth overall.

Impact of GST Adjustments and Growth Prospects in the FMCG Sector

Many companies want the government to adjust GST in the upcoming budget. For FMCG sector which sells things like groceries and household items hope the government will lower GST rates. This could mean lower taxes on products like packaged foods that we use every day. Why? Because if these items cost less people might buy more of them. This could boost sales and help the economy. Since the pandemic people have been careful about how they spend money. So lowering GST could make essential goods cheaper and encourage people to spend more which businesses think could be good for everyone.

According to a recent report, prices for products in the food and beverages sector are expected to increase slightly in the fiscal year 2025 due to higher costs of key raw materials. Despite this overall revenue growth for the entire fast moving consumer goods sector is anticipated to be between 7% and 9%. This growth will primarily be driven by higher sales volumes and a recovery in rural markets. Currently F&B segment constitutes nearly half of the total revenue generated within FMCG sector. While there might be some price increases in F&B products the sector as a whole is poised for moderate to strong growth this fiscal year.

Boosting Rural Employment and Economic Growth

India's consumer industry has seen remarkable growth largely driven by a young population and increasing purchasing power. However, there remains a stark contrast in consumption levels between urban and rural areas. To bridge this gap it's crucial for the government to focus on key areas in the upcoming union budget. This includes creating more jobs in rural areas, encouraging investments in infrastructure and fostering innovation. By supporting exports and boosting local production across both rural and urban sectors, the economy can become more resilient and inclusive. Shammi Agarwal, Director at Pansari Group highlights these strategies as essential for sustaining and expanding India's consumer market.

Creating more jobs and training programs for young people in rural areas helps them earn money in ways beyond farming. This reduces their need to rely solely on agriculture for income. By learning new skills they can find better paying jobs which boosts their ability to buy things they need. Overall these efforts aim to make rural economies stronger and give young people more opportunities to succeed.

FMCG Sector Outlook and Budget Implications

In the first quarter of FY25, companies covered by Motilal Oswal Financial Services in FMCG sector are expected to perform strongly. This optimistic outlook is driven by consistent demand patterns and strategic initiatives across various sectors. Analysts foresee a year on year revenue growth of 7.8% indicating steady consumer demand and effective pricing strategies. EBITDA a measure of operational profitability is also projected to increase by 9.2% highlighting enhanced efficiencies in operations and better cost management practices adopted by these companies. Overall these forecasts suggest a robust start to the financial year supported by resilient market conditions and proactive business strategies within FMCG sector. Motilal Oswal Financial Services suggests HUL, GCPL and Dabur are among their top recommendations in FMCG sector.

Shammi Agarwal highlights the critical importance of the budget's measures to streamline export and import duties on food items. These steps are crucial for India which holds a global share in rice exports and ranks third in mustard oil exports worldwide following Canada and China. Implementing stringent standards akin to those in US or Europe is essential. This move not only promises to enhance the entire Fast Moving Consumer Goods sector but also ensures that Indian products can compete effectively on a global scale. This alignment with international standards could potentially boost India's economy by improving product quality and competitiveness in the global market.

Final Words

Upcoming budget has the potential to significantly influence the future of the FMCG sector. If the government meets expectations it could help the sector grow, innovate and become more sustainable.