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Budget 2021: Apparel sector will become globally competitive, FMCG consumption will go up say experts

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As part of the Centre’s efforts to position India as a fully integrated, globally competitive manufacturing and exporting hub for the sector, an announcement to set up mega textile parks has been made by Finance Minister Nirmala Sitharaman in Budget 2021.

“A scheme of mega investment textile parks will be launched in addition to the PLI scheme,” Sitharaman said. She added that 7 mega textile parks will be launched in three years as part of the scheme.

The mega textile parks will have integrated facilities and quick turnaround time for minimizing transportation losses, eyeing big-ticket investments in the sector.

According to Kumar Rajagopalan, CEO, Retailers Association of India (RAI), Budget 2021 is growth-oriented, well balanced and progressive.

“Overall, it is a popular budget without being populist. The retail industry was almost squashed during the pandemic. It is slowly getting back on its knees with the opening up of the economy. The budget has announced initiatives which touch all segments of the society – women, farmers, entrepreneurs, rural and urban consumers. The positives for retail are the overall thrust on ease of doing business and compliance and infrastructure development,” he said.

“The development of seven mega textile parks over the next three years should help the Indian textile and apparel sector become globally competitive, lead to more investments and thereby create employment opportunities. This announcement in addition to the Rs 10,683 crore earmarked under Production Linked Incentive scheme is expected to reduce the higher transaction costs and transportation losses associated with textile exports, which have been eroding its competitiveness over time,” said Neeraj Bansal, COO- India Global and Leader – Supply Chain Re-alignment, KPMG in India.

“The announcement to set up 7 mega textile parks with plug-and-play facility in 3 years will unlock the potential of new markets for development and provide an impetus to real estate assets, including logistics and warehousing,” said Anuj Puri, Chairman – ANAROCK Property Consultants.

“Focus on ‘Make in India’, increased custom duties, ‘Atmanirbhar Bharat’, ‘Infrastructure’, construction, capital expenditure, etc. is definitely going to result in promoting domestic manufacturing, improving employment etc. Sourcing structures for retailers dependent on imports may have to be revisited and focus on sourcing India-made products may increase,” said Paresh Parekh, Partner & National Tax Leader, Retail Sector, EY.

“With focus on Aatmanirbhar Bharat, announcement of establishment of 7 textile parks by Modi government in Budget 2021 should be welcomed with open arms. It’s a big boost for the local textile industry. And, this will help India become a world leader in textile sector. Hon’ble Union Finance Minister Nirmala Sitharaman in her Union Budget 2021 has clearly conveyed a message that this government believes in giving a big shot in the arm of textiles and local manufacturing with special focus on Vocal for Local,” said Anuj Mundra, Chairman & MD, Nandani Creation.

FMCG Companies Expect Increase in Consumption

Investments in rural infrastructure development, extension of farm credit provisions, and focus on job creation will trigger a consumption boom and boost growth momentum for India’s fast moving consumer goods sector which is showing strong signs of recovery with Covid-induced disruptions having eased out entirely, industry executives said, following the Budget announcements earlier in the day.

“Sourcing structures for FMCG companies dependent on imports may have to be revisited and focus on sourcing India-made products may increase. Purchasing power in the hands of rural and urban consumers through heavy spend on healthcare, infrastructure, housing, market borrowings and spend, is likely to make retailers and consumer companies smile. Further no increase in direct taxes is likely to add cherry to the cake,” added Paresh Parekh, Partner & National Tax Leader, Retail Sector, EY.

“We welcome the Union Budget 2021’s focus on furthering India’s Atmanirbhar agenda and setting it on a growth trajectory in the backdrop of a pandemic. The massive increase in healthcare infrastructure funding coupled with focus on cleaner air, waste management, nutrition and water through the Jal Jeevan mission are crucial steps in improving overall health and living index. Additionally, sustained investment in overall infrastructure development and an emphasis on asset monetization will improve overall utilization and competitiveness. Steps to improve ease of doing business and efforts towards aiding start-ups, MSME and R&D will drive greater local innovation and value addition. All of the above will eventually push up consumer demand and further the country’s transformation towards a globally competitive economy,” said Ahmed ElSheikh, President, PepsiCo India.

“Sustained investment in overall infrastructure development, emphasis on asset monetisation and efforts towards aiding start-ups will drive greater local innovation and value addition – all of which will push up consumer demand,” he added.

“The higher allocation under rural infrastructure will hasten development and go a long way in improving penetration and helping drive consumption of FMCG products in the hinterland,” said Mohit Malhotra, Chief Executive of Dabur India.

“This is a growth-oriented Budget that will propel recovery of the Indian economy post-pandemic, with increased capital expenditure and infrastructure spends across roads, rural, and agriculture sectors. This is expected to further boost consumption across categories. The focus on promoting domestic manufacturing sector through the PLI scheme commitment and revision in custom duties will make India truly AtmaNirbhar and a global manufacturing hub while the scheme for promoting digital payments will provide the necessary fillip to Digital India. We also commend the extension of social security benefits to platform and gig workers and the government vision to ensure universalisation of social security for all workforce,” said Kalpesh Parmar, General Manager, Mars Wrigley India.

“With the announcement of the Union Budget 2021, the Honourable Finance Minister has taken the monumental task of providing stimulus to consumer demand as well as taken the economic environment head-on, aiming for a fiscal deficit of 6.8% of GDP whilst not making any major change in the taxation structure. Considering the challenges at hand in the face of the pandemic and the slowdown pre-Covid, the budget is well balanced, focusing on key measures including a clear spending focus on health care, vaccination and development of physical infrastructure. It prioritises spending to revive the economy after an unprecedented crisis, despite limited fiscal headroom, which is certainly a big positive step, and will aid the industrial sentiment in India greatly. It has also detailed out inclusive development plans for the agricultural sector and this should help in sustaining the momentum of rural growth. Overall, this Union Budget ticks most of the right boxes with an encouraging capital infusion in infrastructure and funding the same through prudent borrowing, divestment and restructuring of allocations without impacting consumers negatively. I believe that, going forward, this will bode well for generating demand, driving consumption and sustaining the growth momentum needed to revive the economy,” said Saugata Gupta, Managing Director, Marico.

“The infrastructure focus will enable companies to expand their rural and urban coverage, further helping drive consumption across the country, enabling the “One India One Market” vision,” said Rajat Wahi, partner, Deloitte India.

“Taking the right policy measures in the budget 2021 for urban infrastructure, transport, textile, fisheries and encouragement of startups, along with disinvestment and Atmanirbhar Bharat programme and production-linked incentive’s (PLI) with a special focus on 13 sectors would generate sufficient and sustainable employment. Only this would lead to stable incomes and higher purchasing power which would, in turn, generate demand for FMCG and food products and services. Furthermore, the allocation of substantive funds for roads, highways and railways will improve the distribution network and efficiencies of food products and services leading to even higher demand and consumption thereby giving a huge fillip to the latter”, said Shyam Sunder Aggarwal, Managing Director, Bikano.

“The much-awaited Union Budget presented by Union Finance Minister Smt Nirmala Sitharaman has done well on allocation for infrastructure in all the prime sectors. The budget has announced stimulus packages in the form of low income tax slabs, tax exemption for notified affordable housing for migrant workers and New Agri Infra Development Cess from February 2. These moves will no doubt promote consumerism but also will boost overall GDP growth. As more finances have been allocated on building roads, housing and new factories, this will also generate income opportunities for our rural consumers and bridge the gap to have last-mile consumption,” said Amrinder Singh, Managing Director, Bonn Group of Industries.



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