Despite some definite signs of improvement in economy in the near future, CARE Ratings does not expect much improvement in Indian fast moving consumer goods (FMCG) sector until Q3 FY21. The Indian FMCG sector has been on a slow growth trajectory since the past four quarters since Q4 FY19. The initial signs of a slowdown were noticed by larger players of the sector when they the witnessed softening of demand for such goods, especially from the rural segment. Rural India, which usually projects about 30 percent higher growth rates than that of urban India, is currently displaying similar growth rates. Multiple factors including the liquidity crisis that began in Q2 FY20 that created ripples in the economy and undoubtedly impacted the FMCG sector, which is dependent on the sufficient availability of cash in the economy. According to the rating agency, FMCG players can deal with the slump in rural consumption and revive demand by introducing smaller packaging so as to encourage users to try new products, and thereby improve volume growth, which is essential for companies in this sector that survive on wafer-thin margins.

(Moneycontrol)