StockGro Expert Vibhu Jain takes a deep dive into FMCG expectations from Union Budget 2025
Diving into the Pre-Budget 2025 expectations of the FMCG industry with Vibhu Jain.
The FMCG industry in India increased due to consumer-driven expansion and rising product costs, particularly for necessary products. Market expert Vibhu Jain believes, “The FMCG industry in India is one of the fastest-growing industries”. However, the sector has reported sluggish growth for the past few quarters.
With the Union Budget 2025 set to be tabled on 1st February 2025, Jain voices concerns and Pre-budget 2025 expectations. The impact of the Budget on the FMCG sector will be tremendous because it will determine the trajectory of one of India’s largest sectors.
Jain highlighted that the rise in fast-moving consumer goods is driven by “disposable incomes, changing consumer habits, and increasing demand for convenience”. The Union Budget 2025 might target these industry drivers through its policies and programmes.
Ahead of the 2025 budget, here we’ll explore the pre-budget expectations of the FMCG industry through the keen insights of the StockGro expert Vibhu Jain.
Increasing demand
Growing economic demand is essential for the sustenance and growth of the FMCG industry. The primary concern for the FMCG industry would be policies targeting increasing demand.
While the rural economy has been performing well for FMCG, the urban slump has been a source of alarm for most businesses. The total FMCG growth in October 2024 was roughly 4-5%. Consumer confidence will increase, particularly in metropolitan areas, if steps are taken to reduce inflationary fears, increase wage growth, and update tax slabs.
Some policies and actions that can promote a rise in demand are listed below.
Income tax and disposable income
The part of an individual’s income that they are willing to spend on consumption is called disposable income. The sluggishness witnessed in urban demand is primarily due to a fall in disposable income.
A 5-7% hike in disposable income for middle-income individuals might result in a 6% spike in consumer expenditure on FMCG and other necessities. This is predicted to have a direct impact of 0.7% on GDP growth.
Experts believe that a reduction in income tax rates will increase disposable income and result in increased demand for fast-moving consumer goods.
Reduction in GST
Although the goods and service tax is levied on producers, it is borne by consumers. Taxes like GST increase the prices of commodities, making them more expensive for the given purchasing power of consumers.
Reduction in GST and other duties will make commodities more affordable when the income earned remains unchanged. Pre-budget expectations indicate lowering taxes, resulting in increased demand.
The FMCG industry has cautioned against increasing excise charges or the National Calamity Contingent Duty (NCCD) on cigarettes and tobacco items, claiming that such actions will harm cigarette producers.
Appliance producers are requesting import tariff reductions on essential parts as well as support for domestic electronics manufacturing, including air conditioners, televisions, and washing machines.
Job creation
Enhancing farm and non-farm earnings and targeted investments in employment development might be crucial to increasing rural employment.
Experts believe that efforts such as increased funding under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA), along with government subsidies and incentives, will boost purchasing power in rural areas.
Pre-budget expectations advocate for better investment in projects and industries in urban areas. It might potentially drive the urban demand by increasing job opportunities.
Quick commerce
Experts expect the establishment of regulations to prevent unfair prices and promote transparency in fund utilisation by quick commerce companies. The advantages of regulating quick commerce are as follows:
- Establish equal opportunities to protect more than 30 million Kirana shops, 8 crore small merchants and distributors, who are critical to India's retail economy.
- The policy will support long-term competition while guaranteeing that quick commerce platforms function responsibly and openly.
- User faith in e-commerce will expand with increased monitoring.
- Conventional retail sectors will benefit from a more equal economic growth trajectory.
- Promoting fair trade standards will lower market concentration concerns and strengthen the retail economy's resilience to external shocks.
PLI schemes
Initiatives like Make in India promote domestic production and reduce import dependency. It gives a competitive advantage to domestic and indigenous manufacturers. The pre-budget expectations of the FMCG industry advocate for more production-linked initiatives (PLI) that can promote the domestic industry and combat the market downturn.
Input costs
The FMCG industry confronts several issues, including increased input costs for raw ingredients such as palm oil, coffee, cocoa, and wheat. These pressures have resulted in rising prices and 'shrinkflation'. A reduction in product sizes to preserve affordability while jeopardizing customer confidence is called shrinkflation. Interventions from governments are necessary to promote demand and give relief to manufacturers.
Other measures
Some other policy anticipations voiced by the FMCG industry along with its stakeholders are listed below.
- Retailers have a high demand for inexpensive financing. Retailers want lower interest rates to secure less complicated funding for their operations.
- Experts expect a greater emphasis on digital transformation and the MSME sector.
StockGro Predictions: Stocks to watch out for
The fast-moving consumer goods market is dominated by big players like Hindustan Unilever, Dabur, and ITC. However, StockGro expert Vibhu Jain says, “Emerging companies like Gopal Snacks are carving out growth opportunities with aggressive expansion plans”.
Companies like Gopal Snacks possess the dexterity, lacking by giants like ITC. It enables these companies to navigate changing economic conditions and adjust their production depending on consumer demand.
Jain believes investors interested in the FMCG industry might watch out for stocks like Gopal Snacks. However, it is important to remember that markets are subject to volatility. Investors must perform due diligence before investing.
Final thought
Fast-moving consumer goods is one of the largest sectors in the Indian economy. The impact of the Budget on the FMCG sector will be significant. Insights from the Union Budget 2025 can give investors a glimpse at possible market movements, resulting in informed investing. The FMCG industry is crucial to India Inc. The Budget is likely to ease the current sluggishness. Jain believes, “With India's young population and a growing middle class, the FMCG industry is poised for continued growth, offering significant potential for investors”. For more details on his advisory calls, connect with him on StockGro.
Note to the Reader: This article is part of Mint's paid consumer connect initiative and is independently created by the brand. Mint assumes no editorial responsibility for the content, including its accuracy, completeness, or any errors or omissions. Readers are advised to verify all information independently.
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Business NewsFocusStockGro Expert Vibhu Jain takes a deep dive into FMCG expectations from Union Budget 2025
First Published:23 Jan 2025, 03:14 PM IST
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