ITC faces stiff restrictions from the government on its tobacco business because of the nature of the product. Discriminatory central taxes are levied on the cigarettes. This has been worsened by the rise in VAT notwithstanding the fact that only 5.7% of all adults smoke cigarettes while almost 35% adults consume tobacco. The per- capita consumption of cigarettes in India is among the lowest in the world while tax per 1000 cigarettes as a percentage of per capita GDP is one ofthe highest. The tobacco industry has always been under government’s scanner. High taxation of cigarettes is one of the major challenges before ITC. Economic
With the implementation of GST it is expected that it will bring some respite to the cigarette business.The Indian FMCG industry is estimated to be over Rs1,30,000 crores in size and accounts for 2.2% of theGDP of the country. The industry has tripled in sizeover the last 10 years and has grown at approximately17% CAGR in the last 5 years, driven by robustmacroeconomic conditions, rising income levels,increasing urbanization and favorable demographictrends. These drivers are expected to continue tofavorably impact the industry which is estimated tofurther triple in size in the next ten years to Rs 4,00,000crores by 2020 [Source: CII, FMCG Roadmap to 2020]. ITC hasbeen rapidly scaling-up its new FMCG businessescomprising Branded Packaged Foods, Personal CareProducts, Education and Stationery Products, LifestyleRetailing, Safety Matches and Incense Sticks (Agarbattis) with Segment Revenues growing at an impressive compound annual growth rate of 35% during the last5 years.In India, food inflation had spiraled to an all-time high of around 18% with commodities such as edible vegetable oils and dairy products witnessing close to 50% inflation owing to several global and India centric causes. The inflationary pressure on input costs was mitigated through a combination of smart sourcing, increased internal...
Please join StudyMode to read the full document