The FMCG industry is expected to be stable in 2020 with a growth of around 9 to 10 per cent, helped by several macroeconomic factors, including expectations of inflation going down and proactive government policies, according to a report.
The FMCG industry registered a growth of 9.7 per cent in 2019, which included e-commerce, said data analytics firm Nielsen in the report titled India FMCG Growth Snapshot. The full year 2020 forecast is stable at 9-10 per cent, it added.
“2019 has been a tough year for the FMCG industry with over four point decline, but we do see it stabilising in the last quarter of the year… However, 2020 offers a stable outlook for the industry arresting the 2019 decline,” Nielsen Global Connect South Asia Zone President Prasun Basu said.
In the fourth quarter (October-December) of 2019, the FMCG industry reported a sales growth of 6.6 per cent and it was 7.3 per cent with e-commerce channels, which according to the report indicates an “arrest” as against sharp slowdown witnessed in the previous quarters.
For the full year 2019, FMCG growth slowed down to single digit in 2019. It was led by the rural market, and growth slipped to nearly half that in the previous year. Comparing zones over the one-year period, while northern and western regions were the most affected, the southern region sustained its growth levels, it added.
Inflation in December 2019 touched a 5-year high of 7.3 per cent. The trajectory would be on a declining trend, and is expected to end in the 4-5 per cent range for this year, the report said. Additionally, rural inflation has touched and is at similar levels with urban inflation on account of rising food prices, it added.
With new crops coming in and onions supply stabilising, inflation is expected to go down in coming months, the report said. Currently, continuing efforts to boost consumption and growth, the government has announced a USD 15-billion infrastructure pipeline for the next five years, it added.
With the third and final tranches for the year of the Pradhan Mantri Kisan Yojana being released, USD 1.7 billion is expected to flow into the economy, the report said. “The Budget 2020 is also expected to bring respite to the masses through tax cuts and additional benefits and may be a reason for cheer,” it added.
Other factors that could impact trajectory of FMCG growth is improvement in India’s global ranking in the World Banks Ease of Doing Business Index from 77 to 63, coupled with proposals to allow higher FDI in select sectors, may lead to higher amount of investments coming into the country, the report said.
Disposable income, consumer sentiment and thereby the trajectory of FMCG growth would also be impacted by factors such as telecom sector having an overhang on the larger growth picture, it added. “With BS-VI norms coming into effect in 2020, the auto sector may start seeing greater stability,” the report said.
Macroeconomic policies coupled with inflation-GDP trajectory, manufacturer actions and consumer sentiment are expected to lead to money in the hands of consumers, thereby fuelling consumption, Nielsen South Asia Data Science Lead Nitya Bhalla said. “Our forecasts for Q120 is 8-9 per cent and for the full year 2020 is 9-10 per cent, similar to the year gone by,” she added.