MUMBAI: Many hopes are vested in the February 1 Union budget about policies and plans to boost consumer demand for the fast-moving consumer goods (FMCG) sector, considered a bellwether for the Indian economy.
Demand for daily essentials that reflects consumer confidence and positive economic outlook has been poor for the last many quarters except in the premium end of the market. The bulk of the market has shown weak demand for consumer goods in an economy marked by slow growth in household incomes and jobs.
However, in its November survey, the National Bank for Agriculture and Rural Development (Nabard) pointed to a revival with 42.2% of rural households reporting income growth and 79.2% of village households showing increased spending compared to the previous round. It attributed higher consumption to moderating inflation and the GST rate cuts.
The September GST cuts have bolstered optimism in categories such as consumer durables, electronics and household essentials, said consulting firm Deloitte. But job-related anxieties remain high, they said, which could curb short-term spending, especially, on non-essentials.
Anand Ramanathan, partner and consumer industry leader at Deloitte, South Asia, said India is well-positioned from an overall consumption standpoint. “For the first time since Covid, mass consumption is back. Earlier, only premium goods were selling. Now broad-based FMCG consumption is up after GST cuts with rural and tier 2 markets rebounding,” he said.
K Ramakrishnan, MD (South Asia) at Worldpanel by Numerator, is more circumspect about consumer demand. Driven mainly by price hikes, the FMCG value growth at 10.7% (in Moving Annual Total) for September 2025 is much higher than volume growth of 4.1% in the same period, he said. During most of 2025, inflation was brought under control but key essential categories saw price hikes due to increased raw material costs. Worldpanel by Numerator measures FMCG consumption by Indian households. The data covers both packaged and branded fast-moving consumer goods as well as unbranded goods sold loose. Listed companies are facing strong competition from unbranded products growing much faster, Ramakrishnan said.
“From an FMCG perspective, India’s consumption is ‘cautiously recovering,’ but it is not yet free flowing. Trip growth (the number of shopping trips to buy FMCG) has stalled for the first time since Covid, which is a weak link in the market,” he added. This may be owing to higher prices as mentioned earlier. “But with GST 2.0 coming into full effect and manufacturers cutting prices across some essentials, shoppers’ confidence should return soon into the market,” Ramakrishnan added.
Despite positive tailwinds, FMCG growth comes with a caveat. “The NCCS CDE shoppers (the lower-income homes in the New Consumer Classification System) are seeing slower growth than the NCCS AB (affluent households) consumers. This suggests that the mass market growth is not yet fully realized. Though accessible pricing should turn this around, we expect a steady growth but not a leap,” Ramakrishnan said.
In the December quarter, the listed FMCG firms are expecting volume-led growth and a single digit increase in revenue. Saugata Gupta, MD & CEO, Marico Limited, believes that the Union Budget’s continued focus on employment creation, rural development, and inflation management will be critical to sustaining consumption growth.
Deloitte’s Ramanathan hopes that the upcoming Budget will help improve demand further by bringing out policies that promote competition. Competition and choice boost consumption, he said, citing the flood of direct-to-consumers (D2C) brands across food and beverage, beauty and personal care, that have extended the long tail of competition in a market earlier dominated by 4-5 large players. “That has promoted a lot of new consumption,” he added.
However, India’s duopoly in many sectors like airlines, telecom, food delivery apps etc. may be restricting growth. “Private capital expenditure is not happening and smaller promoters are not willing to put in money when you have two giants dominating several categories,” Ramanathan said.
He also believes that easier credit availability for both the micro, small and medium enterprises (MSMEs) and marginal households will boost demand. “Since we’re hugely driven by domestic demand, it must percolate right down to the bottom,” Ramanathan said.