How Budget 2024 may boost consumer spending ‘indirectly'

To help states implement reforms in order to realise the goal of "Viksit Bharat," the Union government will lend Rs 75,000 crore interest-free over a 50-year period.

Finance Minister Nirmala Sitharaman’s interim budget 2024 aims to boost consumption by prioritising infrastructure capex spending, even as it skipped direct measures like income tax rebates.

“In today’s budget, though there is no immediate relief for consumers or FMCG players, the increase in capital expenditure by 11.1 per cent to Rs 11.1 lakh crore will indirectly boost consumption,” said Preeyam Tolia, analyst at Axis Securities. “If the government keeps on spending on building roads the labour class will be benefited as that will leave them with more income in hands” he added.

In her budget speech, Nirmala Sitharaman highlighted a 50 percent increase in the average real income of the people, coupled with moderated inflation.

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The finance minister emphasised the government's creation of numerous job opportunities through initiatives like Pradhan Mantri Matsya Sampada Yojana (PMMSY), expected to generate 55 lakh employment opportunities soon. The Pradhan Mantri Kisan Sampada Yojana has benefited 38 lakh farmers and generated 10 lakh jobs, while the Pradhan Mantri Formalisation of Micro Food Processing Enterprises Yojana has assisted 2.4 lakh Self-help Groups (SHGs) and sixty thousand individuals with credit linkages.

“It's crucial to monitor overall employment, particularly if new schemes are compensating for job losses in older programmes. If the overall net employment and real wages go up we can expect a consumption boost” said Devendra Pant, economist at India Ratings.

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Rural demand

Anand Ramanathan, Partner and Consumer, Products and Retail sector Leader, Deloitte India, noted that the budget sustains agricultural growth by promoting crop insurance, encouraging nano fertiliser use, fostering oilseed self-sufficiency, and enhancing micro food processing investments.

“These announcements will provide employment opportunities for the rural economy. Rural consumption will also benefit from infrastructure spending and investments in housing.” he added.

Axis Securities’ Tolia noted that the PMMSY and the schemes to support dairy production may drive rural demand. “Most farmers in India tend to own cows and supply to dairy industry. So indirectly it would help with the income of farmers.” he added.

The consumption sector is hopeful for a potential boost in the full budget in July 2024.

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“The budget provided essential indicators of the anticipated direction for the July budget, emphasising key areas such as innovation, support for start-ups, sustainable development, job creation, and a dedicated focus on Women Empowerment and Domestic Manufacturing, aligning with the overarching theme of 'First Develop India.’” said Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI).