The Hindu Business Line : For a rural boost

On his extensive travels across rural India as founder of MART, a rural marketing and research consultancy, Pradeep Kashyap has seen several instances of the kind of micro level development prescribed by policy statements such as the Union Budget. Kashyap, whose organisation earlier this year had done a study which showed that rural demand for goods and services was alive and kicking despite the slowdown in urban India, says that the increased spend in the rural economy as envisaged by the 2009-10 Budget would give a further boost to consumerism.

Kashyap emphasises that the rural infrastructure and roads are improving and the increased spending on rural schemes targeted at the rural poor will see many first-time consumers coming to the market. “There’s huge spending on rural schemes and next year one can see a lot more demand and more companies will want to enter the rural markets,” he says.

Concurs R.V. Rajan, former Chairman of The Rural Marketing Association of India and Anugrah Madison Advertising. “We know for a fact that rural demand has not been impacted. The FMCG industry will be the first to be benefited, followed by durables, including mobiles, and then the spends on automobiles will get a boost.”

A fact that will gladden the hearts of marketers as they make a beeline for rural markets. The elements have all been outlined: a focus on upgrading rural infrastructure and improving the road network to villages and the huge increase in allocation for rural jobs under the National Rural Employment Guarantee Scheme.

Says V.S. Sitaram, COO, Consumer Care, Dabur India Ltd, “Rural India has been the big growth driver for the FMCG industry in the previous year with this section of the economy accounting for almost 40 per cent of the industry’s sales.” He says that the Government’s decision to extend the loan waiver scheme in view of the delay in monsoons and offer subsidised loans (at 6 per cent) for farmers who have paid their dues in time would put more money in their pockets. “This move would go a long way in giving the rural economy and consumerism a big boost,” he adds.

“With their aspiration levels on the rise, rural India is fast waking up to branded products. The Government’s increased focus on improving and upgrading rural infrastructure and improving the road network to villages would help deepen penetration of branded consumer products,” elaborates Sitaram.

Concurs Saugata Gupta, CEO, Consumer Products, Marico Ltd, “More money in the hands of the farmers is a boon for the goods and services industry. A strong rural economy offers substantial growth potential for FMCG companies. In addition, a good monsoon will help to keep the rural story intact.” Gupta says the impetus offered to the rural sector will boost demand at the bottom of the pyramid and help increase consumption of products of daily use such as soap, oil, tea, sugar, rice and atta.

What of the urban consumer? The small hikes in the exemption limits for tax and the removal of the income tax surcharge are expected to increase the disposable incomes of households. However, the impact of the removal of the fringe benefit tax could be nullified by a perquisite tax payable by the salaried class.

Roopa Shankar, Partner at R&S Consultants, a Bangalore-based personal finance advisory firm, says what the Budget has for the urban salaried class is nothing different from last year.

“The income tax slab raised by Rs 10,000 for individuals and the Rs 15,000 for senior citizens is rather insignificant and does not even offset the salary cuts most of us have taken.” The good thing is removal of cess and surcharge of 10 per cent (applicable for above Rs 10 lakh incomes) will decrease the tax on income, she adds.

Arvind Singhal, Chairman of retail consultancy, Technopak Advisors, says this Budget is more of the same. “We should have had a paradigm-busting Budget with mega projects which with its multiplier effect creates the jobs and consumption.” Instead, he says, the Budget is tinkering with “insignificant things” such as duties on set-top boxes and branded jewellery which really won’t stimulate primary demand.

(BrandLine Team)

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