Budget 2024: A pressing issue that may not wait till full budget

The fiscal deficit target of 5.3% will be set by the government in FY25, keeping in view the fiscal consolidation path till FY26, as it normalises capital spending and refrains from any major announcements in the interim budget before the general elections, Icra and Barclays economists have said. ICRA expects the fiscal deficit target for FY25 to be set at 5.3% of GDP, midway through the expected print of 6.0% for FY2024 and the medium-term target of sub-4.5% by FY26. India's Fast Moving Consumer Goods (FMCG) sector, which has 34% of its market in rural areas, is a good indicator of rural economic health.

It is facing challenges in rural areas due to sluggish demand. The deficiency in rainfall in key agricultural states has disrupted the revival of rural demand seen in the first two quarters of the financial year. President of All India Consumer Products Distributors Federation, Dhairyashil Patil, has told TOI that FMCG sales in rural areas are 20-30% lower than usual.

Demand for daily household products and groceries continued to be challenging in villages during October-December quarter, potentially hurting volume growth of the overall consumer goods sector. Godrej Consumer Products said demand trends in the fast-moving consumer sector during the third quarter were like the earlier quarter, while Marico said urban markets stayed steady but rural markets offered little cheer."High rural unemployment, along with demand for NREGS, reflects rural stress. El Nino derailed the initial green shoots seen at the start of FY24. Increased aggression of smaller players and alternative avenues of spending such as higher spends on education, medical, telecom charges, are leading to softer growth in the FMCG sector," Abneesh Roy, executive director at Nuvama Institutional Equities, has said.

Consumer goods companies and analysts say demand for daily groceries and personal and home products in villages continued to trail urban growth in the December quarter but expect a steady recovery across markets on improving macro indicators, positive consumer sentiment and, importantly, increase in government spending in the election year.Another marker of rural distress is stiff demand for work under the Mahatma Gandhi National Rural Employment Guarantee Scheme. The budgetary outlay of Rs 60,000 crore for the shceme for fiscal 2024 was exhausted by November itself. The government subsequently provided Rs 10,000 crore in urgent assistance to meet demand.The FMCG companies have high hopes from election-year spending that will spur rural consumption. "During an election year, governments often extends benefits which are provided as part of various schemes, offer sops, helping rural households," said Akshay D'souza, chief of growth and insights at retail intelligence platform Bizom.