According to a recent report by Crisil Ratings, the fast-moving consumer goods (FMCG) sector is projected to experience a growth rate of 7-9% in the fiscal year 2023-24. Although this growth rate is slightly slower than the 8-9% recorded in the previous two fiscal years, it still indicates a positive trajectory for the industry.
The primary driver of this revenue growth is expected to be higher volume, supported by a gradual recovery in rural demand. After six consecutive quarters of negative growth, the rural segment began to show signs of recovery in the last quarter of the fiscal year 2022-23. Crisil Ratings attributes this recovery to the increase in rural income during the past two quarters, coupled with a decline in rural inflation levels.
The agency believes that this demand recovery will continue throughout the current fiscal year due to a moderation in inflation, a healthy increase in minimum support prices for key crops, and stable non-agricultural income indicators. On the other hand, urban demand is anticipated to witness stable growth, albeit on a higher base. The urban segment, which demonstrated double-digit growth in the previous two fiscal years, is expected to contribute significantly to the overall growth in the FMCG sector this fiscal year.
Factors such as rising disposable incomes, the continued growth of e-commerce, the expansion of contact-based services, and advancements in premiumization within the home care and personal care segments are expected to drive this growth.
Aditya Jhaver, Director at CRISIL Ratings, stated that the revenue growth within the FMCG sector would vary across product segments and firms but would primarily be volume-driven. The food and beverages segment is expected to grow by 9-10% this fiscal year, while home care is anticipated to experience a slower growth rate of 6-7% following price cuts.
However, personal care is expected to maintain traction with a growth rate of 7-8%, driven by the revival of rural demand and steady urban demand.
