Union Budget 2024: Travel and FMCG Stocks Rise in Bid to Boost Tourism and Employment

FMCG stocks experienced a rise after Finance Minister Nirmala Sitharaman announced schemes in the Union Budget 2024 to boost employment, leading to higher incomes and increased demand for consumer staple products. The Finance Minister stated, "The government has five schemes to facilitate employment and skilling for 4.1 crore youth with a central outlay of ₹2 lakh crore."

By 11:10 am IST, the Nifty FMCG index had risen by almost a percent, while the Nifty 50 remained flat. Leading gainers in the FMCG sector included ITC, Tata Consumer, Dabur India, and HUL, each up by over 1.5%.

The Budget speech outlined nine key priorities for 2024-25, focusing on areas such as productivity and resilience in agriculture, employment and skilling, inclusive human resource development, manufacturing, energy security, infrastructure, innovation, and next-generation reforms.

Before the Budget, analysts anticipated that increased allocation for social sector spending and additional welfare schemes could boost rural consumption, potentially transforming the FMCG sector.

During the interim budget, no specific measures were announced for the FMCG or consumer staples sectors. However, over the past year, many states have increased their budgets for welfare programs, including enhanced cash transfers to farmers, bonuses above the minimum support price (MSP), and farm loan waivers, along with increased capital expenditure.

Travel and tourism stocks also gained following the announcement of measures to boost domestic travel in the Union Budget. Finance Minister Nirmala Sitharaman detailed plans to develop the Vishnupath temple in Gaya and the Mahabodhi temple in Bodhgaya, similar to the Kashi Vishwanath corridor. Efforts will also be made to preserve the hot springs in Rajgir and develop Nalanda. Support will be provided for the development of Odisha's temples, scenic beauty, natural landscapes, and pristine beaches.

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Stocks such as Yatra Online, Easy Trip Planners (Ease My Trip), EIH, Thomas Cook, and Praveg gained up to 4%. In the interim Union Budget, approximately ₹2,450 crore was earmarked for the travel and tourism sector, representing a 44.7% increase from the previously revised allocation, to boost employment and stimulate tourism growth.

Industry players had expected the Budget to include measures such as the rationalization of Goods and Services Tax (GST) through uniform taxation of hotel rooms and granting infrastructure status to the tourism sector, which would provide entities with access to cheaper loans and ease of doing business.

Analysts had noted the significant growth in the tourism industry post-pandemic and the need for government support to maintain this momentum. Axis Securities highlighted India's potential to become a top global tourism center, noting the increased interest from both foreign and domestic tourists post-pandemic.

According to a report by the India Brand Equity Foundation (IBEF), the travel and tourism market in India is projected to generate $23.72 billion in revenue in 2024, with an annual growth rate of 9.6% over the next four years.

To further improve the sector, Axis Securities suggested lowering GST rates, granting infrastructure status to the hospitality industry, and promoting local destinations through fiscal incentives.