Consumer Goods Firms Hope For Fiscal Stimulus

Manufacturers of household goods such as soaps, detergents, air conditioners and television sets said they are still looking for a fiscal stimulus to help boost demand even as the government raised fuel prices and kept personal income tax rates unchanged for the middle class.

“If you look at the overall budget, I think we really did not see a lot of stimuli coming in to increase the overall disposable income that could have led to consumption going up in people, except for the housing part of it. I think our expectations from the budget was a little bit more than what it has delivered in terms of generating demand in the short run,” said Kamal Nandi, president, at electronics industry body Consumer Electronics and Appliances Manufacturers Association (CEAMA), and business head and executive vice-president, Godrej Appliances.

Nandi added that additional taxes on fuel will impact prices and therefore disposable incomes in the short run will go down.

India’s consumer durables firms have been struggling to push sales of products such as television sets, and washing machines over the past few months due to a slump in consumer demand. They had, however, made recommendations to the government asking for lower GST on certain appliances. Nandi, however, welcomed the government’s move to boost local manufacturing in India by imposing customs duties on imported CCTVs and split ACs among others.

Meanwhile, makers of fast-moving consumer goods that are struggling with slowing rural demand lauded the government’s efforts to direct more funds to rural and infrastructure developments, but said that in the short term growth will remain muted. On Thursday, Reuters reported that India is likely to get below-average rainfall over the next two weeks. Monsoon shortfall affects rural demand directly.

“If one looks at the budget numbers carefully, there is a significant increase in allocation for agriculture, rural development, housing and education. The higher spends create employment and improve disposable incomes in rural and urban areas spelling good news for consumer goods companies,” said Vivek Karve, Marico Ltd’s chief financial officer. However, Karve added that in the short run, the move to increase fuel costs may impact inflation and to that extent act as a dampener.

The budget fell short of meeting the industry’s expectations, said Dabur India’s chief executive Mohit Malhotra. “The industry had been looking forward to fiscal stimulus to spur economic growth and lead to a resurgence of the rural economy. However, those big, bold steps are missing,” he said.―Livemint

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