Budget Snapshots | Policy measures expected to address consumption slowdown

The one engine in the private sector that was contributing to economic growth has also developed trouble. The upcoming Budget is expected to take measures to address the slowdown in private consumption. Earlier, this appeared limited to consumer durables such as white goods and automobiles but is now also appearing on the FMCG charts.

The March 2019 quarter numbers of FMCG companies showed a distinct deceleration in volume growth compared to the preceding quarter (see chart). A moderation in rural offtake was expected due to rural distress but the extent of the slowdown was surprising. Growth for some consumer companies slipped from double-digit levels to mid-single digits. Company managements said that weak liquidity in the urban wholesale channel was another reason for slower growth.

Since the farm is where the trouble appears to be most, the markets expect the government to take measures to boost farm income. Ways and means to increase direct income support could be explored, since traditional means of support such as MSP (Minimum Support Scheme) have not been effective enough.

Company managements have been talking of demand growth recovering from the September quarter onwards. Apart from the Budget, monsoons can also influence rural consumption patterns.