FMCG major Hindustan Unilever Ltd (HUL) on Monday said market growth would be “adversely impacted” in short term due to the ongoing demonetisation scheme of the government and GST but in the long term it would be “win-win for everyone”. “In the short term, market growths to be adversely impacted for a few months,” HUL said in a investor’s presentation.
But the company strongly believes that demonetisation and GST are significant growth driver for India and a win-win for everyone, it added. According to the company, demonetisation and GST would help industry with “simpler and effective compliance” and “level playing field”.
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It would benefit the country with “higher investment led growth” and the government with “lower fiscal deficit and higher tax base”. Consumers will benefit by lower inflation, HUL added.
In short term, consumers would be impacted by lower cash on hand and would be cautious with their spend. Initially, they would spend only on basic necessities.
HUL added that trade would be down due to liquidity squeeze and there would stocking of the material as a short term measure. Its impact would be varied across the geographies but the wholesale trade would be impacted the most. Moreover, in the long distance routes, there would be logistical impacts also.
According to the company, gradual improvement in the market impact is expected to be led by urban segment and would depend on liquidity build up across the chain. “Speed of recovery will be dependent on liquidity build up across the chain,” said HUL in presentation copy submitted to BSE.
On November 9, government withdrew Rs 500 and Rs 1,000 notes as part of a crackdown against black money and people have been facing cash crunch.
The government is also aiming to kick off GST from April next year. The Goods and Services Tax (GST) will subsume excise, service tax, VAT and other local levies.