Global Economy

Govt should not rush to bring down fiscal deficit, put more money in hands of consumers: Sanjiv Mehta HUL CMD

The government should not be in a rush to bring down the fiscal deficit and must continue with measures to put more money in the hands of consumers, especially in rural areas where FMCG volume growth has turned negative, Chairman and Managing Director Sanjiv Mehta said on Thursday. With “unprecedented” inflation of commodity prices impacting rural consumption, he said all the relief provided by the government in the last few years for the rural consumers through schemes like MGNREGA and free food supply “ought to be extended in the next fiscal because the economy is still in the process of recovery”.

“The government should not be in a rush to bring down the fiscal deficit because during the period that the private consumption is low and the capital investment is yet to pick up, government investments have got a very big role,” Mehta told reporters in an earnings conference call.

He further said, “… if the government can find ways and means of putting more money in the hands of consumers, especially the rural consumers, that is going to help immensely and the government has done that during the last two years. That should be continued, not just to be continued but perhaps we should look at how do we even do a bit more because we have to understand that the economy is under recovery.”

Mehta pointed out that the tax collection of the government has been very robust, especially in the first seven months of the year and when compared it to “not 2020 but 2019, the tax collections have gone up by 30 per cent which is absolutely fabulous”.

From a Budget perspective, he said the most important thing is that “we have to ensure that the tax rates remain consistent, policy remains consistent. As businessmen, we all crave for that”.

While lauding the government’s efforts on COVID-19 vaccination in India, he said, “Now we need to look at bringing in the booster dose, not just people above 60, but to the entire population. I believe that the stocks and the production capacity that we have, we should be able to cope up with and then children below the age of 15 and that is extremely important.”

Mehta said the high commodity prices have forced FMCG companies to pass the burden to consumers either through price hikes or reduction of grammage, as a result of which the volume growth in rural markets has turned negative while in urban it has remained flat.

“We have not seen inflation like what we’re seeing now, for many years. It’s not just one product, it is not linked to India (only), it’s a global phenomenon,” he said.

Stating that there are a large number of consumers who have limited income and would always try to “titrate the volume”, Mehta said, “It is very clear that the only way for the rural consumers to cope with this kind of inflation would be getting more money in their hands.”

He, however, expressed hope that at the end of this fiscal, “the economy would be as much as what it was in 2019, back to the USD 3 trillion type of demand and what we have to ensure is that the growth rate remains”.

If the growth remains robust, and the commodity prices start coming down, he said, “Then we should be in a good position as far as volumes are concerned”.


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