Higher MSP Allocation Will Drive Consumption In Rural Markets: FMCG Makers

Higher minimum support prices allocation for farmers will help drive consumption of FMCG products in the hinterland while enhancement of public expenditure will create a multiplier impact on growth, leading FMCG firms said on Tuesday, terming the Union Budget as "futuristic" and "growth-oriented".

With an unexpected higher thrust on capital investment, putting more money in the pockets of farmers and continued focus on infrastructure development, it takes the much-needed investment route to drive long-term economic growth for the country, Dabur India Ltd CEO Mohit Malhotra said in a statement.

In the Budget 2022-23, Finance Minister Nirmala Sitharaman has made a provision for Rs 2.37 lakh crore worth of MSP (Minimum Support Price) direct payments to wheat and paddy farmers, financial support for taking up agro-forestry and promoting chemical-free natural farming.

"The higher MSP allocation would go a long way in helping drive consumption of FMCG products in the hinterland. This would be highly beneficial for companies with a strong rural footprint and would help drive growth for the consumer products industry," Malhotra said.

However, Parle Products Senior Category Head Mayank Shah said increase in allocation of MSP is also going to have an impact on inflation.

"It is also going to have an impact on inflation because if you increase the MSP, that eventually is going to increase the cost of agri products, primary inputs in food processing. So procurement is going to be increased. The current challenge ahead of most FMCG companies, which is managing inflation, probably would be aggravated,” he said.

However, ITC Chairman Sanjiv Puri said the budget has "path-breaking measures" and addresses key issues of livelihood generation, enhancing farmer incomes and building climate resilience.

"The substantive enhancement of public expenditure will create a multiplier impact on growth and competitiveness. The multi-dimensional interventions to usher in Next Generation Agriculture through digitalisation, R&D, leveraging strengths of agri-techs and FPOs, will transform the agri sector," he said.

PepsiCo India President Ahmed ElSheikh said the budget reflects the government objective to revive economic growth, increased consumption and fostering investment to fuel post-pandemic growth.

Stating that the government is leading from the front by raising public sector spending to keep the economic recovery on track, he said, "digitisation combined with infrastructural creation will accelerate economic development, stimulate innovation and entrepreneurship, enhance living standards while keeping sustainability at its core."

Nearly 35 per cent of the FMCG sales come from rural areas and after the second wave, it was badly hit. In the recent October-December results, several FMCG companies such as HUL and Marico have reported a decline in sales volume in the rural markets.

Emami Director Harsha V Agarwal termed the budget as "forward-looking" with focus on capital expenditure, which should drive growth.

"The ease of business in India has also been prioritised. So, overall the budget pulls no surprises and focuses on growth of the Indian economy,” he said.

Mars Wrigley, India Country General Manager, Kalpesh Parmar said it will stimulate development in rural as well as urban markets.

"The increase in provision allocated to the Rural Infrastructure Development Fund will have a positive impact on raising rural employment and eventually consumption through higher disposable incomes.

"We appreciate the government for taking comprehensive plans to transition to green energy as well as the steps that the government has been taking towards ease of doing business in India," he said.

BL Agro Chairman Ghanshyam Khandelwal welcomed the government's move for a rationalised strategy to improve domestic oilseed production and minimise reliance on imports..

"A more promising statement was the package that centres on farmers adopting appropriate fruits and vegetables, as well as proper harvesting practices. The move will go a long way towards uplifting the food processing sector," he said.

Tata Consumer Soulfull lauded the finance minister's announcement to declare 2022-23 as the 'International Year of Millets' on the back of UN's declaration of 2022-23 as the 'International Year of Millets'.

"India is one of the largest producers of millets and they are a healthy and sustainable food choice," Tata Consumer Soulfull MD & CEO Prashant Parameswaran said.