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Post-Budget 2024: Key Changes and Their Impact on the FMCG Industry

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#BudgetSimpleHai

#BudgetSimpleHai The FMCG sector has a lot to look forward to considering the announcement that were a part of the budget speech 2024. Here is a brief summary of all that we discuss in this article.

  • Infrastructure has received about 3.4 percent of the GDP as investment.
  • Funding to build up infrastructure and bring education to the underprivileged
  • Agricultural and rural development received the government’s attention in this budget.
  • Reforms have gone into rural and urban housing and employment.
  • The shrimp export industry has received some benefits.
  • These changes are likely to impact the FMCG sector positively.

The 2024 budget has been revealed today, by Finance Minister Nirmala Sitaraman. The budget may or may not meet popular expectations, but that is not the point of this discussion. In this post budget 2024 analysis, we will be talking about the FMCG sector.  In the light of the budget 2024 updates, let’s discuss how the FMCG sector is likely to be impacted by the reforms and revisions announced.

Overview of Budget 2024 and Its Focus Areas

The budget seemed to have a particular focus on agriculture this time around. The reforms and revisions revolved around rural development and the agriculture industry predominantly, in addition to infrastructure and employment. The shrimp industry received some beneficial reforms as well. Rural and urban housing, and energy industry updates were also a significant part of the budget speech. Before we get into how these updates impact the FMCG sector, let’s first take a look at what they are.

Key Changes in Budget 2024 Affecting the FMCG Industry

1) Infrastructure investment: The capital expenditure, or capex, toward the infrastructural developments has increased this year considerably. A whopping 11,11,111 crores (why do you think it's all ones?) have been allotted for this area and the amount forms 3.4 percent of our GDP.

2) Self-sufficiency in pulses and oil seeds: Reforms have been announced to facilitate our country in being self-sufficient in following pulses and oil seeds particularly - Mustard, groundnut, sesame, soybean, and sunflower.

3) Agricultural development: The whole agricultural industry as such has received significant attention in this budget. 109 climate resilient varieties of 32 crops will be released for cultivation as per the budget. Natural farming is encouraged and will be facilitated in many ways as it appears. Speaking of agriculture, rural development also received quite a bit of attention in this budget.

4) Housing and Employment: Care has been taken to address housing needs in rural and urban areas, in this budget. Employment and workforce welfare has been prioritised as well. Interns and women in the workforce have also been given special attention in the form of reform measures to help them.

5) Tax benefits: The income tax structure has been modified a little to result in increased savings for the taxpayers. The slabs have been revised and deductions have increased under the new regime.

Impact of Budget Changes on FMCG Companies

1. Improved Distribution and Manufacturing: Spending on infrastructure makes transport and logistics easier, faster, and more affordable to get goods to market. More reliable energy and utilities mean fewer production disruptions.

2. New Markets: Development in rural and urban areas exposes new markets and increases the number of consumers, increasing access to FMCG products, thereby increasing sales.

3. Higher Consumer Spend: An improvement in housing and employment reforms brings about better living standards and higher disposable incomes, hence a higher spend on FMCG products even at premium prices.

4. Control and Stability in Costs: A country becoming self-sufficient in its requirement of raw materials reduces its import dependence and hence costs, besides minimising the supply chain disruptions caused by any international trade-related issues.

5. Growth Driven by Tax Incentives: Reforms in the rate of taxation can reduce end prices for consumers and motivate business investment in the FMCG sector to foster the growth of the industry.

These are the factors that result in efficiency, extended reach, and growth of the FMCG industry on an aggregate level.

Let’s Shrimp it up

1. Focus on Exports: Government plans to raise shrimp exports by bettering the infrastructure and easing the export process. This would mean easier logistics and cold chain facilities so that the quality is better and competitive enough for the global market.

2. Aiding Farmers: Financial and technical support have been announced for shrimp farmers. It implies easy credit availability on reasonable terms, subsidies for setting up shrimp farms, and even training programs for adopting the best practices and modern technologies.

These would further make Indian shrimp more competitive in the international market. This measure will help in the growth of the shrimp industry, providing a healthy and long-term increase in the income of shrimp farmers.

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Strategic Recommendations for FMCG Businesses

Invest in rural markets: Tuning into the needs of the rural market, and investing in catering better to these needs will be a highly beneficial strategy for companies in the FMCG sector.

Sustainable Practices: With Sustainability being the buzz word of late, investing and adapting to sustainable ways of carrying out business would help a lot in earning incentives and improving brand image.

Health and Wellness Products: Health and wellness products aligned with market trends can be the game changer for FMCG companies.

Increase Exports: Establishing a strong presence in the global market is key. quality standards must be pushed up to meet international expectations.

Case Studies and Examples

Let's look at some examples that show us how FMCG companies have taken positive advantage of policy changes to drive their businesses toward growth.

ITC Limited easily increased rural sales through e-Choupal and provided better management to the supply chain.

Hindustan Unilever (HUL) extended its reach in the rural market through Project Shakti that empowered women, encouraged economic progress.

Nestle India is committed to sustainable packaging.

Dabur India turned local products into regional tastes; invested in Ayurveda and natural products.

Adani Wilmar pushed up the production levels of edible oils and smoothened its distribution, and benefited greatly from these measures.

Conclusion

Overall, the budget has been kind to the FMCG sector, allowing it to find opportunities to thrive in many of its reforms and investment decisions. The companies that notice the areas of change and shift their strategies accordingly can become key players in the industry. The kind of impact this budget will have on the Indian stock market remains to be seen, especially relating to FMCG stocks. We hope our post budget 2024 analysis has been helpful!

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

For All Disclaimers Click Here: https://bit.ly/3Tcsfuc

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Frequently Asked Questions

What are the major changes in Budget 2024 that affect the FMCG industry?

Answer Field

Developmental investments in infrastructure, agriculture, in addition to reforms in income tax, and efforts to increase employment. 

How will the new tax policies in Budget 2024 impact FMCG companies?

Answer Field

With the reforms and revisions, and the investment, the FMCG companies are likely to grow.

What are the new incentives or subsidies introduced for the FMCG industry in Budget 2024?

Answer Field

Although direct incentives for the FMCG sector haven’t been the highlight of this budget, there are many factors that imply positive change for the same.

FMCG companies should invest more in rural markets, switch to sustainable ways of doing business, and focus more on exports among other things

Answer Field

FMCG companies should invest more in rural markets, switch to sustainable ways of doing business, and focus more on exports among other things

How will Budget 2024 impact consumer behaviour and demand for FMCG products?

Answer Field

With favourable tax revisions in terms of income tax slabs and standard deduction, the consumer spending might slightly increase, driving them to consume more. 

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