Election Budget — Rural development, consumption get a boost

Allocations for the MNREGA and road & highway construction hiked

Highlights

• More funds for MNREGA and road & highway construction
• This would help generate higher income in rural markets
• Consumption should get a boost

The interim budget has increased the allocation under the MNEGRA (Mahatma Gandhi National Rural Employment Guarantee Act) from Rs 60,000 crore as per budget estimate of 2023-24 to Rs 86,000 crore for FY24-25. The allocation is the same as the quantum actually spent in FY24 to revive the rural economy impacted by a patchy monsoon and higher inflation. This is especially commendable since the government has adhered to the fiscal deficit reduction target.

The increased allocation would help generate higher income in rural markets. The increase in minimum support prices for Rabi and Kharif crops and lower inflation should lead to higher income in the rural hinterland.

Apart from the MNEGRA, the government has also increased the allocation for road and highway construction.

Consumption has seen lower volume growth on the back of higher inflation. We expect this to gradually come back in FY25 given the various measures by the government.

FMCG stocks such as Hindustan Unilever, Dabur, Emami, and Colgate, which have more than 50 percent of their revenues coming from rural markets, should benefit. Rural focussed retail stocks such as Relaxo Footwears, V-Mart Retail, and Cantabil Retail also stand to gain.