8/2/2019 Budget Impact for FMCG Sector

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Budget impact for FMCG sector

by BankBazaar.com Desk on7, March, 20110 1inShareEmailSharebar

FMCG sector has been growing a healthy CAGR of 11% over the last decade on account ofstrong domestic consumption demand. It is also the 4 th largest sector of Indian economy and has

a market size of about Rs 130,000 Crore. This article briefs you about the post budget impact on

FMCG sector stocks. Hence, if you are an investor interested to put your money in the FMCGsector stocks, then read through this article to know about more!!

Post Budget announcements & Impact on FMCG sector Stocks

A proposal was made to increase the allocation of Bharat Nirman programme by anotherRs 10,000 Crore to Rs 58,000 Crore. This will have a positive impact on the rural

infrastructure development which consequently will boost the companies involved in

driving rural Growth. Companies viz. HUL, Dabur, Nestle will be benefitted. Remuneration was increased under the NREGA scheme. For Anganwadi workers the

remuneration was increased from Rs 1500 per month to Rs 3000 per month. ForAngandwadi helpers the remuneration was increased from Rs 750 per month to Rs 1500

per month. This will enhance the rural disposal income and will boost demand from the

rural sector. Hence, FMCG companies which have substantial revenue from rural sectorwill be benefitted.

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8/2/2019 Budget Impact for FMCG Sector

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There were two proposals for the food processing industry. Government gave an approvalto set up 15 mega Food Park in the fiscal year 2011-12. The storage capacityaugmentation by private entrepreneurs and warehousing corporations will be put in a fast

track. This will help reducing the loss of food articles especially when the food

processing industry is plagued by the losses on account of food storage.

On the taxation front, No amendments were proposed in central excise duty. Thoughsurcharge has been reduced from 7.5% to 5% the MAT has been increased from 18% to

18.5%. This means that the effective MAT rate will now be 20% instead of 19.3%. The

custom duty was waived for the crude palm stearin which is the essential component inthe manufacture of soap. This announcement will have a positive impact on the soap

manufacture company viz. HUL, ITC etc. The central excise duty on bamboo for

agarbatti has been reduced from 30% to 10%. Also, the central excise duty for warehousefacilities on agriculture produce was waived. These will have a positive impact on the

small scale industries. Hence, the FMCG companies in the small caps might show an

upsurge in their stock prices.

Since there was no announcement relating to the roadmap for implementation of GST,Government might miss the April 20112 deadline.

Overall the budget has been positive for the FMCG sector especially when the FMCG sector iskneeling under surging input costs and high inflation.