Sluggish FMCG sector set to move fast on low inflation: Report

After witnessing a muted growth in 2014, India's FMCG sector is all set for a healthy revival due to drop in inflation, a market research firm has said.

Mumbai: After witnessing a muted growth in 2014, India's FMCG sector is all set for a healthy revival due to drop in inflation, a market research firm has said.

"The inflation in the country has fallen to single digit from double-digit it used to be until sometime back. This has paved the way for the revival of the FMCG sector," Nielsen India Region President Piyush Mathur said Tuesday.

The growth in FMCG (fast-moving consumer goods) sector was a tepid 7 percent in the just concluded calendar year, a steep decline from 18-19 percent clocked in 2010-11, he said.

The sector has now entered the revival mode due to the falling price rate, he said, unveiling the consumer confidence index (CCI) findings by Nielsen India for Q4 2014 here.

"The FMCG sector is coming back slowly. The volume growth story will come back because of lower inflation in the next couple of years," he noted, adding "we hope growth in the FMCG sector will be 10 percent during the current calendar year and 12 percent in 2016."

The sense of uncertainty prevailing among consumers during the past few years was responsible for the muted growth in the key segment, Mathur said.

"For the last couple of years, we had a bit of double whammy where consumers were concerned about their job prospects. They (people) were not sure of the economy versus high inflation (equation)."

So, while they were battling high inflation, they were also not very much confident of what was in store for them from job perspective. That's why we saw a flat growth in volumes in certain categories of FMCG and even negative growth in some others during the past couple of years, he added.

The growth will be faster in the rural areas as compared to urban ones during the months to come, he said.

"The rural parts of the country are growing faster than the urban parts when it comes to consumerism."

The consumer confidence in urban parts rose to a score of 129 in Q4 2014 - a 14 point increase from 115 reported in the corresponding period of the last year. This was despite a 2 percent fall at global level in the CCI, the report said.

In an online survey conducted between November 10-28 2014, over four in five (82 percent) urban Indian respondents indicated the highest level of optimism globally on job prospects in the next 12 months, followed by Indonesia (73 percent) and Philippines (73 percent), it added.

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