Tax relief measures are central to fast-moving consumer goods (FMCG) and consumer durables makers expectations, from the coming Budget. But such measures will need to be delicately balanced with the need for government to spend on infrastructure, to spur job creation and thus to drive consumption demand.
On February 1, the Finance Minister Nirmala Sitharaman will announce Union Budget 2025-26.
FMCG companies hope that she will announce income-tax relief, in the form of higher basic exemption limit or higher standard deduction; job creation through government spending; and lower indirect taxes.
Consumer durables hope for similar taxation measures, and lower import duties and wider coverage of production-linked incentive schemes (PLIS).
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For consumer goods
Dhiraj Relli, MD & CEO, HDFC Securities, said, "Initiatives to boost private consumption expenditure, which remains below pre-pandemic levels, could catalyse consumer spending across both urban and rural sectors. Additionally, direct tax incentives could reinvigorate demand for discretionary consumer goods, a segment that has experienced sluggish growth in recent months.”
Higher spending on infrastructure could lead to job creation, which in turn boosts consumption. According to analysts, government will need to take a lead on this. Neeraj Chadawar, Head of Research, Axis Securities, wrote, "Job creation through government activities is a necessity as private capex continues to be sluggish."
Motilal Oswal believes that any support to the construction sector, which is the second highest employer in the country, would be highly effective too.
Consumer durables
Even the consumer-durables industry hopes for a favourable review of income-tax slabs, such that it puts more money in the hands of people.
According to Anil G. Verma, CEO, Godrej Enterprises, more money in the hands of customers will not just "provide tailwinds to the consumer durables industry but also have a multiplier effect on the industries that serve them, through increased capacity utilization and hence also pave the way for private investments to flow in at a faster pace".
The durables industry is looking for an expansion of the PLI Scheme. Bank of America Securities has said that the FM is likely to announce a PLI of Rs 25,000 crore for electronic components manufacturing. BofA Securities has also advocated for reduction in import duties on components, such as compressors or semiconductors, which would reduce the cost to the end consumer and boost consumption further.
Furniture-fittings maker Hettich India believes that inclusion in the PLI Scheme will be a gamechanger for the industry. Andre Eckholt, Managing Director of Hettich India, said, "Inclusion in the PLI scheme would enable the industry to invest in capital expenditure (capex) and adopt advanced manufacturing technologies and know how. This modernisation could reduce production costs and boost global competitiveness which would be complementary to introduction of BIS in Furniture fitting sector. This would be a game-changer, modernizing and making Indian furniture a global brand."
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