As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1, industry leaders are largely aligned on three priorities: reviving consumption by boosting disposable incomes, reducing cost pressures through tax and duty rationalisation, and backing domestic manufacturing and supply chains with predictable policy support.

At the heart of these demands is a concern that while headline consumption has held up, stress remains visible beneath the surface, especially in urban discretionary spending and price-sensitive rural markets.

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Consumption revival hinges on middle-class relief

Several executives argue that sustaining demand now depends less on short-term stimulus and more on putting spending power back in the hands of consumers. Chandra Prakash Pandey, advisor to the board at Patanjali, flagged how global trade disruptions, tariffs and a weakening rupee have pushed up input costs, making affordability a key challenge in India’s largely middle-class consumer base.

He said income tax relief for the middle class should be a central focus of the Budget, as higher disposable incomes would not only improve tax compliance but also translate directly into higher FMCG consumption across daily essentials.

This view is echoed by Prashant Peres, general manager, India at Mars Snacking, who noted that consumption growth will “depend significantly on how effectively the Budget lifts middle-class spending capacity,” particularly as GST rationalisation continues.

“The upcoming budget should focus on Middle class Income tax relaxation slabs which will motivate tax payers to complete the compliance of tax for exchequer and increase the disposable income to spend in buying daily needs. This will boost the consumers to next level and FMCG sector will see substantial growth in the entire value chain as it was noticed during recent GST reforms,” Pandey explained. 

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India’s FMCG industry shows mixed signal growth as it clocked 11% growth in March 2025, but analysts highlight that this was largely price-led due to expensive staples such as edible oil. Urban demand decelerated sharply, with volume growth at just 2.6%, while rural markets grew four times faster, according to Deloitte India.

Tax certainty and GST fixes take centre stage

Beyond demand, businesses are pressing for clarity and neutrality in the tax framework. Bhavik Timbadia, partner at Deloitte India, pointed to persistent GST-related frictions, especially around post-sale discounts, inverted duty structures and blocked input tax credits that are tying up working capital for consumer companies.

She highlighted that excluding input services and capital goods from inverted duty structure refunds contradicts the principle of seamless credit flow, particularly for FMCG firms where logistics, marketing and capex form a significant cost base.

Industry executives are also calling for continuity rather than sweeping changes. Sanjay Sharma, managing director and CEO of Orkla India, said businesses are looking for “continuity and clarity,” arguing that stable taxation and predictable input costs help companies avoid knee-jerk pricing decisions that could disrupt demand.

Manufacturing, localisation and rural infrastructure in focus

Another strong theme is the push to deepen domestic manufacturing while easing cost disadvantages. From consumer durables to food processing, companies want duty rationalisation on key inputs and targeted incentives to support localisation.

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Tadashi Chiba, managing director and CEO of Panasonic Life Solutions India, said rationalising customs and GST duties on components such as compressors and addressing inverted duty structures would improve the competitiveness of locally manufactured appliances and electronics, while strengthening India’s role in global value chains.

“Enhanced support for component manufacturing through existing incentive frameworks and targeted tariff reforms can deepen localisation, improve ease of doing business, and better integrate India into global value chains, accelerating the country’s journey towards becoming a globally competitive manufacturing hub while ensuring sustainable growth for the consumer durables sector,” Chiba added. 

Concerns around duty hikes on key electronic components have also surfaced ahead of the Budget. Avneet Singh Marwah, CEO of SPPL and exclusive brand licensee for Blaupunkt, Kodak and Thomson in India, said the industry is seeking continuity in customs duty relief on Open Cell panels, a critical input for television manufacturing.

While a one-year extension was granted in the previous Budget, Marwah said it has not translated into meaningful backward integration or value addition domestically, barring a single player investing in a bonding facility. Against this backdrop, he warned that any increase in Open Cell duty would add to the strain on an industry already grappling with volatility in memory and display component costs.

In the FMCG and agri space, executives stressed that manufacturing growth must be backed by stronger rural and agri infrastructure. Angshu Mallick, executive deputy chairman of AWL Agri Business, underlined the need for policy support for domestic oilseed cultivation to reduce edible oil import dependence, while continuing investment in agri-infrastructure and farm incomes to strengthen consumption at the base of the economy.

“A clear and predictable policy environment will further enable the industry to scale responsibly, invest with confidence and contribute meaningfully to inclusive self-reliant growth,” he added. 

Deloitte’s recommendations also include creating a dedicated rural FMCG infrastructure fund under PM GatiShakti, noting that high logistics costs and weak cold-chain facilities continue to limit rural market penetration.

Export competitiveness and going global

While domestic demand dominates the discussion, several leaders also flagged the need for export-focused support. Rajiv Kumar, vice chairman of DS Group, called for a comprehensive framework to help Indian FMCG companies scale globally, including capital subsidies, concessional land and tax reliefs.

“This can be achieved by facilitating measures such as capital subsidies and land at concessional rates to bolster rural production and consumption, alongside providing critical tax relief through Input Tax Credits,” he opined. 

Similarly, Mars Snacking’s Peres said India has an opportunity to move beyond commodity exports to higher-value food and nutrition products, provided ease of doing business and processing infrastructure improve. Measures that improve ease of doing business, encourage food innovation, and strengthen processing and supply-chain infrastructure “can help accelerate this transition and position India as the world’s food basket,” he said. 

India’s retail and consumer market is supported by steady domestic demand, deeper digital adoption and a visible shift towards premium products. The sector, estimated at $1.06 trillion in 2024, is expected to nearly double to $1.93 trillion by the end of the decade, growing at around 10% annually. Younger consumers, particularly Gen Z with an estimated spending capacity of $250 billion, are emerging as a key growth driver for brands.