Budget 2016: will rural demand rise for FMCG?

ANUPRIYA NAIR SUNANDA JAYASEELAN | Updated on January 20, 2018

HARSH MARIWALA Chairman, Marico Ltd

It will take 6-12 months for the impact the show, says Marico Chairman Harsh Mariwala

Budget 2016 puts Rural India in the forefront, with a massive hike in allocation. Will this be sufficient to kick-start consumption demand at the hinterland? Speaking to Bloomberg TV India, Marico Chairman Harsh Mariwala said the Budget announcements will take 6-12 months to show results. If the Rain God is kind this year, then we should be able to see an uptick in demand in the rural area too over a period of time, he added.

It’s been a Budget for Bharat. What does this mean for companies like yours, which have a large rural presence?

In the near term, the impact on FMCG as well as companies like Marico is neutral.

There is nothing positive or negative in terms of the Budget provision.

At the same time, all the initiatives identified and announced in the Budget relating rural, agriculture and roads infrastructure will help over a period of time to improve demand. But that may take some time. It’s not going to happen in the near future.

It may take anywhere between six and 12 months to start showing impact. And at one level, these are important initiatives. It takes time to actually translate these initiatives to improve wealth in rural areas. So I think from the medium-term angle, it is a positive for the FMCG sector.

The FMCG sector has had quite a bit of overhang as far as the monsoon is concerned over the past two years. With the outlook still not certain, what is the state of the sector as far as demand is concerned?

Over one to one-and-half years, rural demand has tapered off as compared with urban demand and it has fallen.

I think, that may continue for some time. We have to wait for the monsoons and how the impact of this year's monsoons pans out. But rural demand has been affected partly because of rainfall and the overall wealth of the rural economy has gone down. That has affected rural demand.

But with all the announcements which have been made in the Budget on Monday — and if hopefully the Rain God is kind this year — then we should be able to see an uptick in demand in the rural area too over a period of time.

We have been seeing a lot of schemes being announcing in the Budget. Do you think it can actually translate into increasing consumption and demand on the ground?

Yes, I think so. Now that the Budget has come up with announcements, we have to see how it is being executed as there is always an execution challenge. But as of now, I am hopeful that it will have an impact on rural demand.

What more would you like to say that could lift consumption demand?

The overall economy has to grow because if the economy grows wealth is created within people and then that leads to higher aspiration levels and higher spending.

I think there is no shortcut to the FMCG sector growth.

So we have to see the economic growth and then actually the income level goes up in the rural as well as the urban areas.

Some of the initiatives which the government will have to take this year include implementation of the Seventh Pay Commission and OROP. These should also start having the overall impact on demand in urban areas also.

You have been quite vocal on start-ups as well and you have evolved a new strategy towards technology. Do you think that can aid the rural sector as well? Do you think we need a specific focus on rural and agricultural start-ups?

I think for start-ups, the onus lies with the entrepreneur rather than the government.

You have to identify the opportunity where you can create a demand and where there is a business opportunity existing.

So I think the government has to go on with policy measures — it has announced some tax benefits for start-ups. They have improved the ease of doing business also.

I think steps are being taken. Ultimately the onus of start-ups lies with the entrepreneurs.

Published on March 02, 2016

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