The Hindu Business Line : A marketer’s guide to the Budget

Like a hitch-hiker’s guide to the galaxy, a marketer’s guide to the Union Budget can move in many starry orbits. So much has already been written about growth projections, fiscal deficits and divestment targets that the essence of the Budget often tends to melt into a surfeit of economic jargon. We should therefore step back, look at the key directions the Budget has established, and consider key actionables that marketers can bear in mind.

This year’s Budget has only three key directions: First, to put India back on the path of rapid economic growth, as it recovers from the global meltdown. Second, to ensure that such growth is inclusive and benefits all sections of society. Third, to ensure that India increasingly provides its citizens public services and infrastructure of high quality. What implications do these directions and specific Budget proposals have on consumers and the marketplace? Here are some key impacts and takeouts that marketers can consider.

India: One of the world’s fastest growing economies

The Finance Minister has clearly indicated that his Budget is designed to ensure sustained medium-term growth of 9 per cent per year. This will make India one of the world’s fastest growing nations. To doubly ensure such rapid growth, the budget envisages an increase of over 30 per cent in government expenditure, even though this makes the country’s deficit much larger. Indian marketers should therefore be glad that they will be operating in a relatively high-growth economy, unlike their counterparts in Europe and America who have to cope with contracting economies and deflation.

Hence, marketing strategies targeting Indian consumers can be more aggressive, more confidently resourced and more growth oriented. Contrast this with marketers in the US, who have to adopt more defensive strategies constructed to ensure corporate survival until their economy is back on the growth path.

More money to spend

This year’s Budget clearly puts more disposable income in the hands of Indian consumers. It does so in many ways. The surcharge of 10 per cent on personal income tax has been eliminated in one stroke. This ensures that every upper middle-class family suddenly obtains an additional spending capacity ranging from Rs 2,000 to Rs 10,000 per year. Imagine how many additional shirts or shoes or watches that can translate into! In addition, middle-class households will also benefit by the increase in the personal income tax exemption limit, which ensures that several lakh additional families do not have to pay income tax next year.

Once again, all this translates into more money to spend on consumer goods. This should certainly increase the degree of confidence with which marketers ply their trade.

Demand for many consumer products will continue to show robust growth

The Budget proposes to continue the sharply lower rates of central excise duty announced in the stimulus packages of last year, in respect of several consumer products including cars, trucks and air-conditioners. These stimulus packages had enabled many of these products to offer very competitive pricing, leading to higher consumer demand.

In this Budget, the Finance Minister has once again prioritised growth and left these lower excise duties untouched. This implies a lower cost structure, hence pricing of these consumer products will continue to be attractive, thus creating a conducive environment for consumer demand. In addition, reduction of duties announced in this budget means some products, in fact, become cheaper – such as LCD televisions, mobile phones, branded jewellery and footwear. Marketers can add to this favourable climate by considering focused strategies such as headlining price or a wide range to stimulate consumer demand.

Rural consumer demand will flourish

As part of his “inclusive growth” objective, the Finance Minister has highlighted that his proposals will enable a handsome annual 4 per cent growth rate of agriculture. He has included several generous schemes targeted at rural and agrarian areas. These include an extension of the debt-relief period for farmers, an accelerated irrigation benefit programme, higher flow of credit to agriculture, significant increase in funds for the Rashtriya Krishi Vikas Yojana, and a well-funded National Rural Employment Guarantee Scheme (NREGS). Also schemes to help women’s self-help groups and micro-finance for women.

One positive fallout of these Budget proposals will be higher purchasing power in rural and semi-urban areas. Coming on the back of good rural demand last year, this makes rural marketing an even more critical driver of growth for the year ahead. If only the monsoon Gods support the Finance Minister’s intentions, rural and semi-urban India will continue to hold the marketer’s pot of gold this year.

Many new markets and opportunities will emerge from specific budgetary proposals

Specific budgetary proposals will create market opportunities which some marketers may find relevant. For instance, the budget announces a policy of divestment in public sector undertakings. This will imply many significant possible opportunities for advertising agencies which pitch to handle large marketing campaigns covering these new equity offerings. Similarly, the modernisation of employment exchanges through a national web portal, or the launch of the Unique Biometric identification project for all Indian residents, throws open significant new market opportunities for technology companies which possess these capabilities.

And finally, expect many more measures this year to ensure economic revival.

The Finance Minister has stated that the Budget itself only presents “first steps” towards economic revival, that policy formulation will be a more continuous exercise throughout the year. He has also stated that while the two worst quarters since the global meltdown are behind us, the Government will not drop its guard, will continue to stimulate the economy. Therefore, perhaps one can expect many more policy measures in the next few months: such as permitting FDI in multi-format retail (which will enable entry of large global retailers into India), higher levels of foreign investment in the insurance and defence sectors, permitting private train services to tourist destinations, and a full decontrol of petrol and diesel prices. These will drive further growth, which is indeed the central theme of this Budget. So marketers have many reasons to thank Pranab-da and the nearest Bengali sweet stall may therefore be the appropriate place to head.

(The writer is Chief Operating Officer – Watches, Titan Industries Ltd. These are his personal views.)

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