‘Budget should focus on growth through investment in infra’

Abhishek Law Kolkata | Updated on January 12, 2018

Saugata Gupta, Managing Director and CEO, Marico Ltd   -  BUSINESS LINE

Marico CEO and MD Saugata Gupta says it will help drive agricultural productivity

Demonetisation has led to short-term hiccups for the FMCG sector. But, in the long-term, along with the implementation of the GST, it should be beneficial for organised players, says Saugata Gupta, Managing Director and CEO, Marico Ltd. A growth-oriented Budget, he points out, will propel consumption.

In an interview to BusinessLine, Gupta talks about the impact of demonetisation on the sector, implications of the GST roll-out and Budget expectations. Edited excerpts:

How do you asses the FMCG sector’s performance post demonetisation?

The initial impact varied depending on the category and the region. Wholesale and rural were more impacted. But the way I see it, things have improved. December was better than November. Things are already normalising in Q4. And sometime in Q1 of the next fiscal, things will get back to normal. I believe 2017-18 will be fine for both volume and value growth.

Any regrets?

In terms of the opportunity lost, we had good monsoons and other triggers such as the Pay Commission which could have given a flip to consumption. But, I believe the hiccups are short term. In the long term, there would be a benefit with the Goods and Services Tax coming in.

So the FMCG sector recovery that was expected in H2 is unlikely to happen now...

You will have to knock off this quarter (October-December, 2016). It was an unusual quarter. If you take that out, it would be fairly similar to last fiscal. We had expected the second half (October-March) of the fiscal to be much faster than the average run rate of FY16; that did not happen because of demonetisation.

Did demonetisation derail supply chains?

No. I think that phase is over. We have not seen any (supply chain disruptions).

Are you seeing recoveries for the sector in Q4?

A very gradual recovery is happening. I think the East and the North were much more impacted than South and West (parts of India). In the South and the West, things are more urbanised. For the North and the East, the rural and wholesale component is a bit higher. The current hiccups should normalise in this quarter (January-March).

With demonetisation and the subsequent push towards digitisation, do you see structural changes coming in the FMCG distribution network?

Everything will not get into a digital economy; there will be a cash component. According to me, the issue is not just demonetisation, but also about linking it with GST (implementation).

Some times, the cash business is out of the tax net. So the GST and demonetisation together will have to ensure more compliance. That will lead to better tax collection for the government and a level playing field for organised players like us. It will also ensure competitive advantage for players with organised and direct distribution.

A benefit of the GST implementation will be the simplification of doing business. These (benefits) may not be immediately visible. But in terms of network optimisation, logistics simplification and so on, it will be beneficial. Better compliance to tax should also help.

Do delays in GST roll-out irk you?

It is actually good that the GST (roll-out) is happening in July. In case of transition (to GST), I believe some pipeline correction will also happen. It also gives time for the government to ensure better execution.

What are your Budget expectations?

The Budget should focus on growth through investment in infra, driving agricultural productivity so that the rural sector gets back on track.

The second area is relief (in income tax) for the salaried class so they have more disposable income and can drive consumption.

And the third is, the government should continue to encourage private investment and drive employment. Generating employment is much more important to leverage our demographic dividend.

Has there been a growth in private investments?

Certain sectors have been witnessing some (private investments). But there has to be a far greater stress on private investments and employment generation.

Published on January 30, 2017

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