ITC Executive Director: Optimistic about festive season with GST benefits, but inflation a concern

New Delhi, Sep 25 (PTI) Leading FMCG player ITC expects a surge in the festive demand this season after the GST rate cut, and reduced prices will have a “multiplier impact” on volumes for the packaged food industry, a senior company official said.

However, the FMCG major is also cautious about the existing inflation on some products, its Executive Director and Divisional Chief Executive of the Foods Business Division, Hemant Malik, said.

ITC, which owns popular brands as Aashirvaad, Sunfeast, Bingo!, and B Natural, has already passed on the benefits of the GST rate cuts applicable from September 22, and expects a boost in consumption and investment as well as a multiplier impact on the economy.

"A lot of expenditure by consumers is also driven by sentiment. When the message reaches consumers that prices have come down, it does allow people to open their purses. Once that happens, it is a multiplier impact in terms of volume increase … It has a multiplier impact on the economy, both from the aspect of employment as well," Malik told PTI on the sidelines of the fourth edition of World Food India 2025.

The packaged food industry has been impacted significantly by slower growth due to high inflation. However, the company is “optimistic” on a rise in urban demand following GST reduction and the government’s production-linked schemes in the food processing industry, he said.

“Inflation is still a concern,” he said and added that because edible oil consumption remains higher in the food industry and its prices continue to go up, Malik said, noting that this challenge needs to be addressed.

Malik said the company has passed on the GST benefits to the consumers, which he said “will make a difference in terms of growth of the economy.” Under GST 2.0, the government had kept all daily essentials, including food products, under the lowest tax bracket of 5 per cent from earlier higher slabs.

However, Malik also said there are some challenges, such as magical price points; however, those are 'transitory' in nature for a period of one and a half to two months.

"Most importantly, the government has been fairly confident that market forces will ensure that each of us pass the benefit to the consumer," he said, terming it as a "very mature move" instead of putting some anti-profiteering kind of pressure.

According to Malik, for the snack industry, it is easy to pass the grammage immediately from September 22, the day it was implemented.

"However, when you look at a magic price point of biscuits for 5 rupees or a 10 rupee price point, you are not able to, as it takes a lot of effort to get the weight changes," he said adding, "It might take about two months. So right now we have passed the MRP drops but the problem with that MRP drop is I don't know whether it will finally reach the consumer or not." The Industry has to work very fast to make sure that the benefit in the grammage is available.

Over the Production Linked Incentive (PLI) Scheme for the Food Processing Industry, Malik said ITC has participated in both the ‘ready to eat’ segment and the ‘fruit and vegetable’ segment.

"I am happy to report that we have completed all the investments that we had committed and I think even the process of giving the incentives back has been fairly detailed, smooth. I would say that we are getting benefit or whatever we have looked at," he said.

However, Malik also added that there has been some challenges in the last few years in certain segments, where the consumption has taken a dip.

"Therefore to that extent, certain categories have not been able to... although investments have happened but the growth has not happened. We are in touch with the ministry to keep a little easier look towards that," he said.

According to Malik, the food industry has a 'huge opportunity' for India as only about 10 to 15 per cent of packaged food is there, compared to 40 to 70 per cent of developed economies.

"So the growth that is likely to happen in food processing is significant," he said, adding, "We are all committed to continue to invest. (3:33) We have invested over the year more than 15,000 crores, and this journey continues." PTI KRH LUX MR