Rural India demand recovery slowdown to continue

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Sighting a report on FMCG market rural India demand recovery by world’s leading marketing data and analytics business, Kantar, news daily, ‘The Economic Times’ has said that long anticipated revival in growth rate of demand for consumer goods in rural India may further get prolonged. The daily publication has attributed the demand recovery slowdown in the hinterland to liquidity problem faced by inhabitants caused by price hikes taken by FMCG companies in last two years.

Owing to supply chain disruptions caused by the Covid-19 pandemic and Russia’s invasion of Ukraine, prices of raw materials used in manufacture of consumer goods hit through the roof, consequently, since Covid-19 pandemic, the consumer goods companies have continuously taken price hikes until June quarter last year. This has hit rural consumption hard. And demand recovery in hinterland has taken a backseat. Then, from June 2023 quarter onwards, commodity prices began to stabilise. Consequently, consumer goods companies did take price cuts but current prices are  still higher as compared to two year ago level. This has burned a hole in pocket of rural consumers.

In last few quarters, rural India demand had started to show recovery albeit subdued. Consumer goods industry sales volume growth increased till September 2023 quarter, but, it again fell in December quarter and now the Kantar report says that growth rate migh continute to fall for next two quarters as well.

In Q3 FY24, the FMCG market in the hinterland grew 5.2 per cent as compared to 6.9 per cent in the preceding quarter.

While, in urban India, the FMCG industry sales volume growth rate has continuously fallen since June 2023 quarter.

FMCG market in urban India grew by 8.4 per cent in Q2 FY24 and by 5.6 per cent in Q3 FY24. Earlier, in June 2023 quarter it had grown by 12 per cent.

Overall in India, the FMCG market sales volume growth rate has also seen continuous deceleration since June 2023 quarter. It grew by 8.5 per cent in June 2023 quarter, then, it fell to 7.2 per cent in subsequent quarter, then, it again fell by 5.2 per cent in Q3 FY24.