The economic slowdown in the country is showing its impact. The growth rate in the Fast-Moving Consumer Goods (FMCG) sector reached the lowest ebb in seven years. The main reason responsible for decrease is the decline in the growth rate of rural India.
The Downturn
Data released by research company, Nielsen, revealed that the rural market’s growth rate declined to 5% in quarter3 of 2019. The growth rate in 2018 was 20%. The rural market has a 36% share in FMCG sales and was growing at a faster pace than the urban market. The sales grew by 8% in the urban sector whereas the rural market grew by 14% in the previous year. The growth rate of the overall FMCG market has declined to 7.3% from 16.2% in Q3 of 2019.
The descent in farmer’s income has severely affected landless workers. The workers constitute two-third of the entire rural households. The Nielsen data also revealed the fact that the slowdown has worst-hit Northern India whereas the demand in Southern India, especially in the urban market, remained almost the same. The rural market growth stood at 1% as compared to 17% last year. Besides, there is a decrease in consumption in urban areas due to the high prices of commodities. This is because of the increasing gap in unemployment rates from 3.6% in Q1 to 10% in Q3 of 2019, thus reducing the disposable income of households. Many small manufacturers have exited the market due to the prevailing situation.
Reasons for Decline
This fall in the FMCG sector is accounted for floods in almost thirteen states in the country, low wages, and high inflation. The reduction in consumption is contributing to the low GDP of the country. Nielsen lowered down its annual growth prediction from 11-12% to 9-10% in July. The growth rate is further expected to decline in the range of 6.5-7.5% in quarter 4 of 2019.