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Implementation
of the proposed Goods and Services Tax (GST) and opening
of Foreign Direct Investment (FDI) are expected to fuel
growth further and raise the industry’s size to $47
billion (Rs 225,000 crore) by 2013 and $95 billion (Rs
456,000 crore) by 2018, according to a new Ficci-Technopak
report.
| FMCG
INDUSTRY CATEGORY BREAKUP |
| Household
Care |
10% |
| Tobacco |
15% |
| Personal
Care |
20% |
| Lighting |
2% |
| Food
& Beverage |
53% |
| RECOMMENDATIONS
TO FMCG COS: |
| *
Strengthen consumer understanding |
| *
Improve engagement with modern retail |
| *
Make the most of zero CST — CST has come
down from 4% two years ago to 2% at present.
Reduction to 0% by next year is expected to be
on track |
The
report has made wide-ranging recommendations to iron out
the rough patches in the industry’s growth trajectory,
urging the government, FMCG companies and retailers to put
their act together. It suggests the government needs to
rapidly implement GST to replace the multiple indirect
taxes currently levied on FMCG products. This would have
several benefits, including uniform, simplified and
single-point taxation and reduced prices. Consumption
growth and improved tax compliance will result in an
increase in tax collections.
The
30-35 per cent taxation levels in India are much higher
when benchmarked internationally, argues the report. Also,
the tax structure creates logistical delays because of its
multi-level system at central and state levels, with each
state itself having different tax structure.
The
study also urges the government to enforce Trade Mark and
Copyright Laws to drastically reduce counterfeits, and
protect the rights of consumers and FMCG companies.
Counterfeit products account for almost 5 per cent of the
industry and pose serious challenges in its growth and
also impact the government’s tax collections
significantly.
Modernisation
of labour laws, the study says, will enable Indian
manufacturers to improve efficiency, serve consumers
better and also raise exports from India.
The
study simultaneously calls on traditional retailers to
invest in better customer service, product display and
store ambience and invest in infrastructure, especially
for products that require a controlled temperature
environment. Its advice to modern retailers is to work
with FMCG brands to improve fill rates, capture consumer
and shopper needs better, and explore co-branding and
co-promotion opportunities.
The
report also highlights the sector’s contribution to the
socio-economic front. With about eight million kirana
stores selling FMCG products, it supports the livelihood
of 13 million people. Another 25 million people are
employed as wholesalers, distributors, stockists, etc.
Also, $2 billion (Rs 9,600 crore) of agricultural produce
is purchased by the FMCG sector, processed and converted
into value-added products. And 40 per cent of media
industry earnings from advertising come from the FMCG
sector, a contribution of $2 billion (Rs 9,600 crore).
About 10 per cent of FMCG production is outsourced to
contract manufacturing units, with ancillary industry
contribution at about $1.5 billion (Rs 7,200 crore).
The
FMCG sector is also one of the major contributors to the
exchequer with $6.5 billion (Rs 31,000 crore) paid through
direct and indirect taxes.
Source :
Business Standard - Mumbai, Maharashtra, India,
dated 09/07/2009
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