Consumer goods industry expects govt to address input cost inflation in Union Budget 2022

Consumer goods from daily essentials such as soaps and shampoos to discretionary products like television and air-conditioners have seen 10-15% price increase over last year because of high inputs and logistics costs exacerbated by supply disruptions. The prices increases have helped deliver double-digit topline growth, but margins have taken a knock. The increased pace of vaccination, pent-up demand, improving consumer sentiment, and the festive season spurred growth but a slowdown is visible now. In addition, demand for MGNREGA jobs is still high, indicating elevated unemployment and a tepid rural market which will further have a bearing on consumption. Companies expect the government to address the ongoing elevated input cost inflation so that they can reverse price increases that have exceeded wages growth and impacted demand, especially in rural markets



BUDGET RECOMMENDATIONS

• Review the export incentive for air conditioners under the RoDTEP scheme and consider raising it
• Rationalization of GST on certain consumer durables such as AC & large screen TV from 28% to 18% to spur demand
• Accelerate employment creation through infrastructure investment and incentivize private capex investment
• Tax reforms to increase disposable incomes that would raise demand and aid overall growth