Budget 2023: Tax relief brings a pocket full of buy

With its focus on improving the purchasing power of middleclass households through tax relief for salaried employees, the budget will help spur demand for packaged consumer goods, discretionary items and two-wheelers, industry executives said. Measures to improve farmer incomes will also drive consumption in small towns and rural markets, they said. “There will definitely be a consumption boost across categories; FMCG tends to gain when the overall economy benefits and inflation is low,” said Saugata Gupta, managing director of Marico, maker of Saffola edible oils.

Demand from the rural market – which contributes more than 35% to annual FMCG sales – has slowed down significantly over the last five to six quarters, mainly due to steep inflation. The extent of de-growth in the hinterlands, however, has reduced from double-digits in early 2022 to 6% slump in December. The budget is expected to speed up this recovery process.

“Increased investments in the rural sector and reduction of personal income tax, which the common man has been yearning for, will have a cascading effect in driving consumption,” said Harsha Vardhan Agarwal, vice-chairman, Emami.

Retailers, which have been expanding in small towns faster than in urban markets to recruit new consumers, said they will further accelerate focus on smaller towns. Two-wheeler sales are also likely to see a revival after staying sluggish for over three years, executives said.

While tax rationalisation will increase the disposable income only marginally, it would boost sentiments, which, in turn, will lead to demand revival to some extent, said Nikunj Sanghi, managing director of JS Fourwheels, largest dealer of two-wheeler market leader Hero MotoCorp in North India. “The additional infra spend will also have a trickledown effect in the long run,” he said.

The budget’s agriculture measures, along with exemption of personal income tax to Rs 7 lakh under the new tax regime, and simplification of tax slabs, will revive consumption in tier II-III markets, companies said. “Tax savings will certainly fuel impulse consumption, such as dining out, more so in the smaller markets,” said Ravi Jaipuria, chairman of RJ Corp, whose group company Devyani International is the largest franchisee of Pizza Hut, KFC and Costa Coffee in India.