Proposed GST Reforms Will Boost Domestic Demand: Zydus Wellness CEO

Government measures such as interest rate cuts and proposed reduction in Goods and Services Tax (GST) could potentially boost demand in the consumption economy, according to Tarun Arora, CEO and director, Zydus Wellness.

“There has been an interest rate cut, reduction in income tax and now this GST cut. In the initial part of its term, the government was focusing on the supply side of economics. In the last year, it has made a consistent effort to support demand,” he said during a conversation with NDTV Profit.

He highlighted the importance of reviving consumption in both rural and urban areas.

“There were a couple of years when the rural sector was really struggling, but over the last four to five quarters, we have seen conditions improve. With extraordinary rain this year, it should only get better, unless some crops are impacted. The urban market, on the other hand, has been under pressure and often taken for granted. Several of these measures should boost urban consumption too,” the top executive said.

He added that urban consumers contribute to 70% of packaged goods consumption despite comprising just 30% of the population.

Arora’s optimism comes amid speculation over the proposed GST reforms, mentioned by Prime Minister Narendra Modi in his Independence Day speech. The government is expected to roll out the next generation GST reforms around Diwali.

Talking about the demand scenario for Zydus Wellness, Arora acknowledged challenges in specific segments of its food and nutrition portfolio. Nutritional drinks have faced sluggish growth due to a shift toward alternative products by consumers. Sweeteners have been impacted by health concerns.

The company is also expanding its Sugar Free brand into new food categories like chocolates and cookies, which are showing promising growth on e-commerce platforms.

When asked about the growing threat from smaller, local, and digital-first brands, Arora acknowledged the changing market dynamics. "The information is far more democratically available. The price discovery, the product discovery are far easier than earlier," he observed.

Rather than viewing this as a threat, he sees it as a positive development for consumers and a challenge that will push larger players to innovate faster. "It puts pressure on people like us to maintain our leadership," he said. 

Shares of Zydus Wellness closed 0.65% up at Rs 2,005 apiece on the NSE on Thursday, while the benchmark Nifty50 ended 0.13% higher at 25,083.75.