Revenue of the fast-moving consumer goods (FMCG) sector is expected to grow 7-9 per cent this fiscal 2023-24, a tad slower than the 8-9 registered in the past two fiscals, according to Crisil Ratings.
Higher volume is expected to drive revenue growth, amid support from a gradual recovery in rural demand. On the other hand, the rating agency said urban demand will see stable growth on a higher base. Demand from the rural segment began to recover in the last quarter of fiscal 202-23 after being negative for six consecutive quarters, it added.
“This was supported by growing rural income in the last two quarters, coupled with falling rural inflation levels. Demand recovery is expected to sustain this fiscal with continuing moderation in inflation, healthy hike in minimum support prices for key crops, and stable non-agricultural income indicators,” it added.
The urban segment, which grew in double-digits the past two fiscals, will continue to support overall growth this fiscal owing to increasing disposable incomes, the continuing rise of e-commerce, growth of contact-based services, and progress on premiumisation in-home care and personal care segments.
According to Aditya Jhaver, Director at CRISIL Ratings, revenue growth would vary across product segments and firms, but will largely be volume-driven.
“While the food and beverages is expected to grow 9-10 per cent this fiscal, home care should slow to 6-7 per cent after price cuts. Personal care will see continued traction growing at 7-8 per cent, owing to revival in rural demand and steady urban demand,” Jhaver added.
However, the rating agency cautioned that any sharp movement in agri-based and crude-linked raw material prices, as well as, the impact of El Nino on farm income need monitoring.