Budget 2023: D2C Industry Pins Hope On Supply Chain Advancement, Research Grant, Tax Relief

In India, D2C has been backed by a blend of major and mid-sized investors, resulting in a rise in early-stage funding for D2C brands.

As the Budget 2023-24 is to be presented by Union Finance Minister Nirmala Sitharaman on February 1, citizens, industries and markets await eagerly for the outlook of the next year. The budget will be presented with no shadow cast by the Covid-19 pandemic. While other sectors may deprecate the coronavirus-induced lockdown, India's Direct-to-Consumer (D2C or DTC) witnessed steady growth.

The D2C business model emerged during the pandemic due to high internet usage. The D2C sector helped change buying habits of the end users as the interpersonal connection promoted a sense of additional security. Meanwhile, in order to negate the major supply chain hurdle the manufacturers themselves promoted, delivered and advertised their products directly to consumers.

Present Market Size Of D2C Sector

Currently, India is home to over 600 direct-to-consumer brands with an estimated market size of about 55 billion US dollars in 2022, as per Statista, an online platform for market insights.

In India, D2C has been backed by a blend of major and mid-sized investors, resulting in a rise in early-stage funding for D2C brands. In 2021, 105 deals were made, totalling 2.14 billion USD invested in D2C brands, according to Statista.

D2C Sector Forecast 

India's D2C market is expected to grow at a CAGR of 34.5% during 2022-2027, as per Mordor Intelligence report 'India D2C E-commerce Market - Growth, Trends, Covid-19 Impact, And Forecasts (2023 - 2028)' 

D2C Sector Budget Expectations

“The US $12 billion D2C sector shall be on the outlook for some relief in terms of taxation and major advancements in supply chain management. With inflation and recession coming to the forefront in the last year, the industry has been facing a major challenge in controlling costs," Anurag Kedia, Co-founder & CEO of Pilgrim said.

"We also believe the tax implications of ESOP need refinement. Currently, when ESOPs get exercised, there’s a tax implication on the employee even if they are not selling the shares in the secondary market. There is a need to revisit this provision," Kedia added.

"We are glad that in the Union Budget of 22-23, a significant portion (Rs 3,050 crore) was allocated to the Ministry of Ayush to promote preventative healthcare. We are expecting it to increase further this year, in line with the uptick in consumer acceptance of preventive healthcare and traditional medicine in the post-covid era. This uptick can be accredited to changing preferences of consumers and their inclination towards a healthy lifestyle. The industry would appreciate an increased budget earmarked for research grants in the field of Ayurveda to foster innovation," Shantanu, Chief Operating Officer of Kapiva said.

"We think that this year's budget would provide some advantages to the pet care business, which is growing rapidly in India. Given the category's growing stage, we expect a GST reduction will provide impetus to packaged pet food penetration. The majority of products in the market today are imported, so this budget should assist in incentivising domestic pet food manufacturers. It would aid and stimulate domestic manufacturing while reducing dependency on imported pet food. The majority of products in the market today are imported, incentives to domestic pet food manufacturers would aid and stimulate domestic manufacturing while reducing dependency on imported pet food,” said  Aman Tekriwal, Co-founder, Supertails.com.