 "FMCG")
The fast-moving consumer goods (FMCG) sector in India is likely to witness a revenue growth of 7 to 9 per cent in 2023-24 (FY24), marginally lower than 8-9 per cent in the last two years, ratings agency CRISIL said on Wednesday.
The year is likely to see a higher volume amid a gradual recovery in rural demand and a stable growth in urban demand. However, the prices are expected to be range-bound due to rate cuts in several products on the back of the cooling of raw material prices.
According to Anuj Sethi, senior director at CRISIL Ratings, "After subdued volume growth in the past two fiscals (1-3 per cent), the sector is likely to record a 4-6 per cent volume expansion this fiscal, supported by a gradual recovery in rural demand (35-40 per cent of overall demand), and steady urban demand (60-65 per cent of overall demand)."
CRISIL also said that the operating margin is expected to improve by 50 to 100 basis points to the pre-pandemic level of 20-21 per cent.
After falling for six consecutive quarters, the demand in rural India began recovering in the last quarter of FY23. This was mainly due to a rise in rural income and a sustained fall in inflation.
"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," CRISIL said.
The urban segment, it added, will continue to support the overall growth due to an increase in disposable income, rise of e-commerce, growth of contact-based services and premiumisation of in-home care and personal care products.
"While the food and beverages (50 per cent of the FMCG sector revenue) is expected to grow 9-10 per cent this fiscal, home care (25 per cent of sector revenue) should slow to 6-7 per cent after price cuts. Personal care (25 per cent of sector revenue) will see continued traction growing at 7-8 per cent, owing to revival in rural demand and steady urban demand," said Aditya Jhavar, director at CRISIL Ratings.
However, Sethi also added that any adverse impact of El Nino conditions on rainfall patterns this monsoon season might impact the prices in the sector.
