Big reforms were missing from the Union budget to revive consumption demand that has cooled off across rural and urban India.

The finance minister announced the expected cuts in personal income tax rates, but they are conditional on the taxpayer forgoing exemptions. The budget also did little to jump start rural demand, as the government’s flagship rural job guarantee scheme and income support scheme for small and marginal farmers saw a marginal increase in fund allocation.

“The expectations from this budget were very high, and it has partially delivered," said Vivek Gambhir, managing director and chief executive officer (CEO), Godrej Consumer Products Ltd. Gambhir, however, said the government “recognizes that spurring consumption is clearly the need of the hour". “Some of the steps being introduced should help improve consumer demand incrementally this year in both rural and urban India," he added.

In 2019, the fast moving consumer goods sector grew 9.7% in value, but growth remained sluggish in the hinterlands amid a squeeze on farm incomes. Demand for items of daily use in India’s villages, which contribute to over one-third of the business for FMCG firms, almost halved from 16.2% in 2018 to 8.8% in 2019, market researcher Nielsen had noted earlier this month.

Mohit Malhotra, CEO, Dabur India Ltd, termed the budget as “incremental", which continues the government’s focus on doubling farm income by 2022, offers significant sops at the lower end of the spectrum and enhances the purchasing power of India’s consuming class. “However, the big bold steps needed to restart economic growth are missing. That said, the fact remains that the government had little room for manoeuvre."

“Expectations were higher to drive consumption, we were expecting more measures. I feel there was a lot of scope—the budget does not have enough stimuli for driving consumption," said Kamal Nandi, business head and executive vice-president, Godrej Appliances.

Duties were increased on components like compressors, motors and some finished goods. “The move is expected to result in some price escalation in the short run, on products like refrigerators, air conditioners, coolers, washing machines, air purifiers and chest freezers," said Nandi, who is also the president of Consumer Electronics and Appliances Manufacturers Association.

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