Consumption in India’s fast-moving consumer goods (FMCG) sector continued to expand through November and December, but the drivers of growth have shifted following the rollout of GST 2.0, according to industry data cited by market trackers.
While overall demand has stabilised, the recovery remains uneven across categories, regions, and consumption channels.
Inventory Reset Revives Consumption-Led Growth
Industry experts note that recent GST changes triggered a clearing of older inventory across the supply chain. This reset allowed distributors and retailers to restock essential products, paving the way for a return to consumption-led growth.
Earlier quarters had seen growth driven largely by price increases and stocking behaviour, rather than genuine demand. In contrast, the October-December 2026 quarter marked a shift toward volume-driven growth, even though year-on-year value growth moderated.
Price Cuts Weigh on Value Growth
The lower value growth during the quarter was attributed mainly to price reductions following GST rate cuts. While these cuts were passed on to consumers, their immediate impact on demand has been limited.
According to industry observers, the expected price elasticity, where lower prices translate into higher demand, has not yet materialised in the short term. However, discretionary consumption is expected to improve gradually over 2026, as households adjust to the new price environment.
Competitive Pressures Across Sales Channels
Channel data indicates rising competition between quick commerce platforms, e-commerce players, and modern trade stores. Recent months witnessed pricing disruptions, with multiple pack sizes and price points for the same products across channels.
These distortions have begun to normalise from January, suggesting greater pricing stability going forward.
At the same time, private labels and direct-to-consumer (D2C) brands are gaining traction on online platforms. This shift may be impacting reported sales volumes of listed FMCG companies, even as overall consumption levels remain steady.
Urban vs. Rural Demand Trends
Demand trends continue to diverge between urban and rural markets:
- Urban consumption has been supported by higher spending on select packaged foods and indulgence categories
- Rural growth has been driven primarily by essentials such as food staples and milk-based products
Improved farm output and lower inflation have helped support rural demand, even as discretionary spending remains subdued.
Outlook: Gradual and Uneven Recovery
While the GST reset has helped stabilise FMCG consumption and shift growth back toward volumes, the recovery remains uneven across categories and regions. Industry participants expect a gradual improvement in discretionary demand over the coming year, rather than a sharp rebound.
Source: CNBC-TV18