Budget 2017: Auto, consumer goods and durables sector hope for consumption boost

Automobiles, consumer durables and packaged goods firms are hopeful of measures that create jobs and increase consumers’ disposable income


Following demonetisation, consumer confidence has fallen, and this needs to be revived by the budget to augur consumption. Photo: Pradeep Gaur/Mint
Following demonetisation, consumer confidence has fallen, and this needs to be revived by the budget to augur consumption. Photo: Pradeep Gaur/Mint

Mumbai: Supporting and boosting consumption which floundered after demonetisation should be a key agenda for Budget 2017, say manufacturers and retailers of automobiles, consumer durables and packaged goods. The industry is hopeful of measures that create jobs and increase consumers' disposable income.

The withdrawal of Rs 500 and Rs 1,000 notes has caused significant disruption to the economy, impacting overall gross domestic product (GDP) growth, which is expected to decline to 6.8% (earlier estimate: 7.8%), said Devendra Kumar Pant, chief economist and senior director, public finance, India Ratings and Research Pvt. Ltd, in a note on 25 January. Pant expects the adverse impact may flow into the next financial year as well, based on the current situation.

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According to Central Statistics Office (CSO) estimates, growth in nominal private consumption expenditure will slow to 11.1% in 2016-17 from 12.3% in 2015-16. Private consumption accounts for 55% of India’s GDP and was expected to pick up in the second half of fiscal 2018 given the good monsoon and also the Seventh Pay Commission hand-outs. “However, demonetisation has over-shadowed some of the tail winds that were to come from these (good monsoon, Seventh Pay Commission) and the government will have to look at ways to support consumption, and not just boost it,” said D.K. Joshi, chief economist, Crisil Ltd. A fillip to consumption will also incentivize the private sector to make investments that will further aid our economic growth, said Joshi.

“For fast-moving consumer goods (FMCG) industry to grow, budget needs to put more money in hands of more people,” said Sanjiv Mehta, managing director and chief executive officer, Hindustan Unilever Ltd, India’s largest consumer packaged goods firm, in an earnings conference on 23 January. HUL saw its sales volume growth drop 4% due to demonetisation.

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Proactive reforms to stimulate demand by increasing the money in the hands of the emerging middle class and rural India and efforts to accelerate job creation, particularly non-farming jobs in areas such as manufacturing and construction should be the focus of Budget 2017, said Vivek Gambhir, managing director, Godrej Consumer Products Ltd, adding the need of the hour is to lift more people out of poverty, improve the living standards of millions of Indians, in both rural and urban areas. 

Following demonetisation, consumer confidence has fallen, and this needs to be revived to augur consumption. “We hope that the Union budget is singularly focused on concrete measures to revive the economy and boost consumer sentiment,” said Govind Shrikhande, managing director, Shoppers Stop Ltd.

To be sure, the industry is looking for incentives to support consumption, not subsidies. “We don’t look at sops. A level-playing field and favourable tax rates under goods and services tax (GST) will help the trade significantly. We are only looking at ways wherein consumption can be incentivized,” said Kishore Biyani, group chief executive officer, Future Group.

As such, “a well-defined, right and prudent budget with specific focus on infrastructure, manufacturing, taxation and provide rural stimuli to revive and boost consumer, business and investment confidence,” said Pravin Shah, president and chief executive (automotive), Mahindra and Mahindra Ltd.

Shally Seth Mohile contributed to this story.

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