The FMCG sector in India has witnessed slower growth since last one year. The reasons for slowdown were liquidity crunch, tepid consumer sentiments and lower farm incomes. Indian market is diverse in nature and expected to take some time to gain momentum. The government has taken slew of measures to strengthen the economy and to boost the consumption. Hence positive outcomes are expected which will benefit the FMCG sector in coming months.

In the upcoming budget 2020, it is expected that government will introduce reforms to control inflation and to increase demand which will help to normalize the market condition thereby strengthening the economy. Following are the expectation from budget 2020-

Slashing personal income tax rates: - In past, measures had been taken to increase the supply side of the economy, but this did not help to strengthen the consumer demand. Hence, to increase the higher disposable income in hands of rural consumers, the government should increase the taxation limits for individual thereby resulting in lower income tax rates.

Creation of Jobs: - FMCG companies will consider in increasing capacity and hiring more people once their sales will gain some momentum.

Reduction of GST rates: - Lowering GST rates in all FMCG items to a single tax bracket will give policy certainty to FMCG industry.

Retail stores facing heat from E-commerce companies: - E-commerce companies are offering basic products like biscuits, cereals, grains etc. at a very low cost. Hence due to this the retail shopkeepers are facing challenges from these companies. It is suggested that small grocery shop and FMCG shops should get tax break on a certain annual income which help them revive.

Outlook

Apart from this, it is expected that government should invest in infrastructure and should also offer incentives to drive rural consumption. In the upcoming budget, it is expected that government will work towards the reforms to put higher disposable income in hands of consumers thereby increasing the demand. Also, the government should bring some measures to provide relief to retail shopkeepers who are currently facing huge competition from E-commerce players. Market researcher Nielsen India on Tuesday maintained its annual growth outlook for India's fast-moving consumer goods (FMCG) sector, which is reeling under a demand slump in both rural and urban markets, to 9-10% for 2020. In 2019, the sector grew 9.7% by value, due to weak quarterly growth rates in rural India.