Budget 2020: Will Budget benefit the FMCG sector?

Budget 2020: Will Budget benefit the FMCG sector?

Anshu Budhraja. (Photo credit: YouTube)

By Anshu Budhraja,

The FMCG sector in India witnessed slower growth last year owing to factors such as dampened consumer demand, lower farm incomes, and liquidity constraints. India is a diverse market, and we feel it will take some time for its revival to happen. The Government has been working toward stimulating consumption and strengthening the economy, and we remain optimistic about the outcomes for the benefit of not just FMCG, but all sectors.

In the upcoming Union Budget 2020, we hope the Government will introduce reforms to increase consumer demand and control inflation to normalize market conditions with the primary focus on boosting economic growth. In our view, factors which can significantly benefit the FMCG sector are:

Lowering of personal income tax rates, 

Reduction in interest rate, 

Investment in infrastructure, 

Incentives to drive rural consumption, 

Creation of jobs

Considering the soft employment outlook, we hope the Government acknowledges the unique positioning of the Direct Selling industry in aiding employment and entrepreneurship opportunities for individuals. Currently, India contributes less than 1%* to the global Direct Selling industry at USD 193 Billion as compared to China, which contributes 18.5%*. With a total of 5.7 million direct sellers* in India, of which almost 69% are women, a congenial business environment can provide the right impetus for the direct selling industry to realize its full potential, further contributing to the growth of the economy and entrepreneurship. With the endeavor to encourage micro-entrepreneurs, we urge the Government to bring the Direct Selling (DS) services under the Reverse Charge Mechanism. This move will significantly reduce the burden of GST compliances from the small businesses (run by direct sellers), bolstering productivity, and fueling the growth of the DS industry.

Furthermore, rationalizing GST on healthcare supplements from 18% to 5% will be a welcome move considering a holistic healthcare system combined with nutraceuticals and health supplements that provide significant economic value.

While the reduction in corporate tax rates last year was a welcome move, a further reduction of corporate tax for domestic companies will help encourage additional investment, enhanced productivity, and output over time.

 * Source:  Indian Direct Selling Association's (IDSA) Annual Survey 2018-19.

(Anshu Budhraja is the CEO of Amway India)