Budget 2022: Government’s spending boost to revive rural consumption

The union government’s record allocation on infrastructure development, push for expansion of local manufacturing and digitisation exercise in hinterlands will boost rural economy in the coming days. The rural market that is now grappling with subdued demand, resulting from the impact of record high commodity inflation, is set to come back to life, said industry experts and businesses.

The Finance. Minister Nirmala Sitharaman today announced a massive Rs 7.5 lakh crore allocation under capital expenditure in the Union Budget for FY2022-23. Next year’s allocation is 35.3 per cent higher compared to Rs 5.54 lakh crore that she had announced for the current year in the last year’s Budget.

Apart from building of 25,000 kms of national highways, Rs 44,600 crore has been allocated for expansion of irrigation systems in the country. Allocation for procurement of food grains, at minimum support price (MSP) has been raised to Rs 2.37 lakh crore, while Rs 48,000 crore will be spend on building affordable homes under the Pradhan Mantri Away Yojana. 

Further, a new project has been announced for deployment of optical fibre cables to connect and digitise the remote and rural areas. Additionally, as the Production Linked Incentive (PLI) scheme enters into its third year, support to boost manufacturing activities in 14 sectors is set to go up from April onwards.

According to industry experts, these measures are set to impart life in to the rural economy and boost consumption of rural households that, of late, have suffered.

“The push for infra development and local manufacturing are going to directly help the rural income levels. Be it the development of roadways or setting up of new plants and expansion of manufacturing capacities, these projects are set to happen in rural areas only. This will not only create jobs but will also boost consumption. I am expecting the air conditioner market to double in next three years,” B. Thiagarajan, Managing Director of air conditioning major Blue Star told Business Today.

According to Mohit Malhotra, CEO, Dabur India, massive MSP support and inclusion of the 1.5 lakh post offices into the core banking system are other big positives, particularly for rural India. “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. Dabur has been investing ahead of the curve in strengthening its rural footprint, which today covers over 85,000 villages,” he said.

“Finance Minister Nirmala Sitharaman’s Union Budget 2022-23 may not have met the general expectations of being a short-term consumption booster, but it surely has all the right ingredients for becoming an impactful long-term growth-oriented move,” added Malhotra.

According to Avneet Singh Marwah, CEO of consumer durable manufacturer Superplastronics, the rollout of 5G services in 2022, as announced by the FM today, will have a direct impact on sales of televisions. “As consumers will upgrade to smart TV’s and will have better content quality. The Government has spoken about adding 80 lakhs affordable homes, which will benefit the consumer electronics industry,” he said.

Kumar Rajagopalan, CEO, Retailers Association of India said, “The DESH STACK e-portal for skilling, re-skilling and up-skilling through online training, will benefit various industries including retail, where there is a need for quick onboarding of skilled talent as it is a labour-intensive sector with high employee churn rates. Additionally, it will help increase overall employment in this sector. The various initiatives around urban-planning, rural development, infrastructure development and logistics and transportation will ease movement of people and resources and facilitate faster distribution for retail. This will help reduce the overall wastage especially for perishables, which is a big worry in retail.”

According to Angshuman Bhattacharya, Partner & National Leader- Consumer Products & Retail sector, EY India, the “consumer goods companies could expect an increase in consumption over the medium term driven the by the thrust on employment and financial inclusion. For the retail sector, reeling under the pandemic, the budget unfortunately has very little direct support to offer.”

Pradeep Bakshi, MD & CEO, Voltas said, the “government has unleashed plans for PLIs and phased manufacturing for other sectors, that are bound to grow rapidly.

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