Expectations of FMCG Sector from the Union Budget, a critical component of the Indian economy, anticipates significant considerations in the Union Budget 2024. This sector encompasses a wide array of products, including food and beverages, personal care items, household products, and more. Given its impact on daily life and the economy, the expectations from the budget are multi-faceted. Here, we delve into the key areas where the FMCG sector seeks support and reform.

1. Taxation and GST Reforms

One of the primary expectations from the Union Budget 2024 is the rationalization of the Goods and Services Tax (GST) structure. Currently, FMCG products are taxed at various rates, ranging from 5% to 28%. The industry advocates for a more streamlined GST regime with fewer slabs to simplify compliance and reduce the tax burden on essential goods. Lowering the GST rates on essential FMCG products can make them more affordable, thus boosting consumption.

Moreover, there is a call for the inclusion of petroleum products under the GST umbrella. This move could lower the cost of transportation, which is a significant component of FMCG logistics expenses. A reduction in transportation costs would, in turn, reduce the overall cost of goods, benefiting both manufacturers and consumers.

2. Incentives for Rural Market Development

The rural market represents a substantial growth opportunity for the FMCG sector. To tap into this potential, the industry expects the budget to allocate more funds towards rural infrastructure development. Improved connectivity, electricity, and internet access can enhance the distribution and reach of FMCG products in rural areas.

Additionally, schemes that bolster rural employment and income levels, such as the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), can increase purchasing power in these regions. The sector also looks forward to incentives for local sourcing and production in rural areas, promoting small-scale industries and local employment.

3. Support for Innovation and R&D

Innovation is the cornerstone of growth in the FMCG sector. Companies are constantly seeking to develop new products, improve existing ones, and enhance production processes. Therefore, the industry expects the government to provide incentives for research and development (R&D). Tax benefits, grants, and subsidies for R&D activities can stimulate innovation, leading to the creation of high-quality, competitive products.

The FMCG sector also advocates for the establishment of innovation hubs and incubators to support startups and small enterprises. These hubs can provide access to funding, mentorship, and technological resources, fostering a culture of innovation and entrepreneurship.

4. Sustainability and Green Initiatives

Sustainability has become a crucial focus for the FMCG sector, driven by consumer awareness and regulatory pressures. The industry expects the Union Budget 2024 to support green initiatives and sustainable practices. This support can come in the form of tax incentives for companies that adopt eco-friendly practices, such as reducing plastic usage, implementing energy-efficient processes, and sourcing sustainable raw materials.

The budget could also introduce stricter regulations on waste management and recycling, alongside incentives for companies investing in these areas. Support for renewable energy projects and the promotion of green packaging solutions are other areas where the FMCG sector seeks governmental backing.

5. Improvement in Supply Chain and Logistics

Efficient supply chain and logistics are vital for the FMCG sector, which deals with high volumes and perishable goods. The industry expects the budget to focus on infrastructure development, including roads, ports, and warehouses. Enhancing the logistics network can reduce transit times and spoilage, leading to cost savings and better product availability.

Digital transformation of the supply chain is another area of interest. The sector looks forward to initiatives that promote the adoption of technology in logistics, such as blockchain for tracking and automation for warehousing and distribution. Investments in cold chain infrastructure are also crucial, particularly for perishable goods.

6. Ease of Doing Business

The FMCG sector anticipates measures to further simplify the regulatory environment, making it easier to do business. Streamlined processes for licensing, compliance, and approvals can reduce the administrative burden on companies. Additionally, a more predictable and stable policy framework can enhance investor confidence and attract foreign direct investment (FDI) in the sector.

7. Focus on Health and Wellness

With an increasing focus on health and wellness, driven by the pandemic and changing consumer preferences, the FMCG sector expects the budget to support initiatives in this space. This includes incentives for producing healthy and nutritious food products, fortification programs, and campaigns to promote healthy eating habits.

The sector also looks forward to support for the Ayurveda and herbal products industry, which has seen significant growth. Tax incentives and subsidies for these products can encourage more companies to enter this space and cater to the growing demand for natural and health-oriented products.