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Budget Impact: FMCG sector hails Budget, sees more income in consumer's hand

01-March-2005
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Budget Impact: FMCG sector hails Budget, sees more income in consumer's hand

The honchos of the Indian FMCG industry have hailed the Union Budget 2005-06 as being balanced. A few have even claimed that Finance Minister P Chidambaram has pulled off a dream budget. They feel a reduction in individual taxes and the large spending on rural and infrastructure will put a lot of disposable income in the hands of consumers and thereby stimulate demand for goods and services especially FMCG.

Hoshedar K Press, Executive Director and President, Godrej Consumer Products

The budget is yet another dream budget from P Chidambaram. The reduction in the max rate of import duty will help the soap industry as palm oil is imported. Thus costs will reduce and companies and/or consumers will benefit. Reduction in corporate taxes is always welcome. This should boost profits and dividends and stimulate the stock market. Reduction in individual taxes and the large spending on rural and infrastructure will put a lot of disposable income in the hands of consumers and thereby stimulate demand for goods and services especially FMCG. The budget also proposes large spending on areas such as education, health, etc., which is a dire need for the country.

Ashok K Aggarwal, President, DS Group

We see the budget as another step towards macro-economic development of the country entailing widespread development in the rural sector and urban centres. As far as the levy of 10 per cent ad valorem tax on Pan Masala, Gutka and Zarda and 10 per cent tax on cigarettes is concerned, we welcome the intention of the government but will expect judicious spending of the revenue generated by this additional tax for development of education and health infrastructure.


Percy Siganporia, MD, Tata Tea

Two major requests of the tea plantation industry have been addressed: removal of additional excise duty at Rs 1/kg and thrust on incentives for replanting and rejuvenation. These measures would contribute towards reduction in cost of production and address the viability of the plantation industry. The decision to define a road map for agricultural diversification into fruit/flowers/dairy/fishery, etc., will help in supplementing and increasing the returns of tea plantation land. The main enabler for growth of the branded tea business from this year’s budget has been the implementation of the VAT rate of 4 per cent across all states. This is one of the best news for the tea industry. Thrust of initiatives to promote Agriculture, Infrastructure and Rural economy has a consequential lag impact of boosting demand for tea consumption. Concurrently the emphasis on a combination of measures in the financial sector will improve rural entrepreneurship and will open up distribution and product placement opportunities.

M P Pusalkar, Executive Director & President, Godrej Industries Ltd. - Foods Division

Overall a good budget. For the Edible oils/Vanaspati sector the removal of excise duties will remove the disparities which would have resulted from units producing such goods in excise exempted areas like Kandla/Kutch. It will also bring down prices to the consumer by about Re 1per litre. It is reassuring that no change has been made in the excise exemption for fruit drinks/juices.

Aditya V. Agarwal, Director, Emami Group of Companies


It has rightly focused on the growth of agriculture, rural and social sectors, backward districts and States and employment generation. I feel that provision of SPV for infrastructure development and plan to develop seven mega cities including Kolkata will accelerate the multiple growth process and lead to a quantum jump in the growth of the economy. However, I think that 10 per cent Service Tax on housing sector will have negative impact on its growth and the proposed tax on withdrawal of Rs.10,000 or more from the banks on a single day is unjust.

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