With inflationary pressures, Indian citizens' consumption has plunged significantly. Hence, the economists are expecting a much-needed look out from the government to push the consumption front. The upcoming Union Budget, 2022-23, will be presented by the Union Finance Minister Nirmala Sitharaman on February 1, which can try to increase public consumption. According to analysts, offering income tax soaps and reducing fuel taxes can help to boost the pandemic-hit economy of the country, and help to increase consumption.
To boost consumption, another major focus will be on employment. Already the pandemic reduced the employment generation capacity of India Inc., while wage reduction has been a big concern. A hike in retail inflation was the reason behind the price rise of every consumer good. The additional burden of employment cut mostly reduced the purchasing capacity of the citizens. The disposable income of the country-people also fell sharply. So, a two-way lookout on employment generation policies and controlling the rising inflation rate can support the consumption front. India Ratings in a report mentioned, the union government should 'continue with the revenue and capital expenditure pattern of FY'22 to provide stability and consolidation to the past/ongoing efforts.'
Commenting on the budget's lookout, N H Bhansali, CEO-finance, strategy and business development, Emami Limited stated, government's "Focus should be on infrastructure, start-ups, healthcare, and renewable energy among others. While GST and direct tax have been streamlined over a period, a few more initiatives like moderating the highest slab in individual taxation in line with corporate tax, honoring the commitment of fiscal benefit in the North-East where benefits are being denied on flimsy grounds are expected to be regularised."
The fast-moving consumer goods (FMCG) segment has also been hampered due to the pandemic. Rural India is a big market for the FMCG segment, but recently it has been showing weakened demand on the same. The government's direct intervention for the sector will help its consumption. Recently, Mayank Shah, senior category head, Parle Products told the media, "The expectation would be how the government puts money in consumer's hand to ensure that the demand is not getting affected. One of the ways it can be done is by reducing the tax on the salaried class or by increasing the income tax slabs."
The needy sectors of the economy currently are the MSME and agriculture sectors. These are two major employment generating sectors in India. A thorough focus on these two sectors will directly help the country's consumption to rise.