Lower Income Tax to Boost FMCG Sector Growth
Finance Minister Nirmala Sitharaman's reduction in income tax and increase in the standard deduction rebate in the Union Budget 2024-25 is poised to significantly boost the Fast-Moving Consumer Goods (FMCG) sector.
According to marketing research firm Kantar Worldpanel, the FMCG sector is expected to register a 6.1 percent annual growth in FY 2024-25 in the rural market, compared to 4.4 percent last year. However, growth in the urban market remains flat at 4.2 percent for the current fiscal year.
The report from Kantar Worldpanel indicates that rural market volumes could match those of the urban market, which currently has higher volumes. The rural FMCG market is becoming increasingly valuable, now generating nearly half the volume and value for the sector.
Kantar Worldpanel noted that the growth in the rural FMCG market is driven not by consumption but by population increases. The firm also highlighted a trend towards premium products, including food spreads, dressings, face scrubs, body washes, hair conditioning serums, muesli, and Korean noodles.
Additionally, the report pointed out the rapid adoption of e-commerce and quick commerce in rural areas.
In the Budget presented on Tuesday, FM Sitharaman reduced personal income tax to 10 percent on income up to Rs 10 lakh per year under the new tax regime, while increasing the standard deduction from Rs 50,000 per year to Rs 75,000 per year.
These fiscal measures are expected to enhance disposable income, thereby stimulating consumer spending and driving growth in the FMCG sector, especially in rural markets. The increased purchasing power could lead to higher demand for both basic and premium FMCG products, benefiting the overall market.