INDIA ADDA – Perspectives On India

IBEF works with a network of stakeholders - domestic and international - to promote Brand India.



Dikshu C. Kukreja
Dikshu C. Kukreja
Mr. V. Raman Kumar
Mr. V. Raman Kumar
Ms. Chandra Ganjoo
Ms. Chandra Ganjoo
Sanjay Bhatia
Sanjay Bhatia
Aprameya Radhakrishna
Aprameya Radhakrishna
Colin Shah
Colin Shah
Shri P.R. Aqeel Ahmed
Shri P.R. Aqeel Ahmed
Dr. Vidya Yeravdekar
Dr. Vidya Yeravdekar
Alok Kirloskar
Alok Kirloskar
Pragati Khare
Pragati Khare
Devang Mody
Devang Mody
Vinay Kalantri
Vinay Kalantri

FMCG Sector prospects in the Indian Rural Market

FMCG Sector prospects in the Indian Rural Market

Fast-moving consumer goods (FMCG) is the fourth-largest sector in the Indian economy. There are three main segments in the sector — food and beverages, which accounts for 19% of the sector; healthcare, which accounts for 31% of the share; and household and personal care accounting for the remaining 50% share. The urban segment contributes to about 55% of the revenue share, while the rural segment accounts for 45%. The Indian processed food market is projected to expand to US$ 470 billion by 2025, up from US$ 263 billion in 2019-20.

India’s retail sector is worth US$ 836 billion in FY22, with an 81.5% contribution from traditional retail. Furthermore, organised brick-and-mortar retail makes up 12% of the overall retail market, followed by online sales channels at 6.5%. The Indian online grocery market is estimated to exceed sales of about Rs. 1,310.93 billion (US$ 17.12 billion) by 2026, at a CAGR of 28.99%. The gross merchandise value (GMV) of the online grocery segment in India is expected to increase 18 times over the next five years to reach US$ 37 billion by FY25.

The FMCG sector has received good investments and support from the Government in the recent past. The sector witnessed healthy FDI inflows of US$ 20.11 billion from April 2000-March 2022. After the Covid-19 pandemic, consumers are shifting to more environmentally friendly products, encouraging FMCG companies to consider progressive business models as a future necessity to minimise environmental effects. The government is introducing various initiatives like Production Linked Incentive Scheme for Food Processing Industry (PLISFPI), Project Shakti, FDI liberalisation, etc. to encourage sustainability while promoting the rural market.

The Fast-Moving Consumer Goods (FMCG) Sector in India
Consumer packaged goods (CPGs), also referred to as fast-moving consumer goods (FMCG), are non-durable commodities that consumers use on a daily basis. FMCG products include things like prepared foods, soft beverages, cosmetics, and home cleaning supplies. The FMCG market in India is dominated by the personal care and home sector, which generates more than 50% of the industry's overall revenues. Additionally, FMCG profits have grown from 5% between 2010-14 to almost 7% during 2020-22. The FMCG business is poised to grow by US$ 310.5 billion between 2022-2026,  primarily due to rising consumption of ready-to-eat food products. In fact, it is predicted that by 2025, consumer spending on food will be equal to US$ 8.85 trillion. Over the next few years, the demand gradient will also be propelled by rising consumer awareness and the growth of organised retailing.

According to Crisil, the FMCG sales in the country are likely to climb by 7-9% in terms of revenue in FY23, driven by increasing prices, while the volume growth will be restrained at 1-2%. Additionally, in the previous fiscal year, the industry had an 8.5% increase in revenues and a 2.5% increase in volume.

The Indian FMCG market has surpassed the global market, with a double-digit growth rate over the last two decades. The quick expansion in population is inversely correlated with the rise in consumer goods consumption. Similar factors include regular new product launches, increased consumer awareness of various FMCG products, rising middle-class disposable incomes, easier access to consumer goods, a noticeable shift in consumers' lifestyles in developed and developing nations, strong brand advertising and attractive price points, strong logistics and distribution channels of such companies, expansion of online commerce, and increased R&D spending by both established players and newcomers in the market.





Household Care

Fabric wash (laundry soaps and synthetic detergents); household cleaners (dish/utensil cleaners, floor cleaners, toilet cleaners, air fresheners, insecticides and mosquito repellents, metal polish and furniture polish)


Food and Beverages

Health beverages; soft drinks; staples/cereals; bakery products (biscuits, bread, cakes); snack food; chocolates; ice cream; tea; coffee; soft drinks; processed fruits, vegetables; dairy products; bottled water; branded flour; branded rice; branded sugar; juices etc.


Personal Care

Oral care, hair care, skin care, personal wash (soaps); cosmetics and toiletries; deodorants; perfumes; feminine hygiene; paper products

According to the below pie chart, the FMCG category constituted more than 65% of the total retail basket in 2022-23, amounting to US$ 543.34 billion approximately, out of US$ 835.9 billion.

Source: India Times

The below chart depicts the FMCG growth (including both rural and urban) between Q3CY21-22 to Q3CY22-23.

Due to the high pressures of global inflation and variations in rainfall across rural areas, the FMCG urban sales showed a rise of 4.4% against the preceding month, whereas the rural markets declined by 0.2% in the month of December 2022. The FMCG sector shows a downward trend due to the unfavourable business environment, but many industrial players and analysts believe that the rural segment is still under pressure and is expected to have a positive trajectory in FY24.

Source: NielsenIQ

Opportunities in the Rural FMCG Sector in India
The fast-moving consumer goods sector in India is growing more quickly in rural as compared to urban areas. In October 2022, India's rural markets accounted for almost 35% of the overall Fast-Moving Consumer Goods (FMCG) sector sales. While the unorganised sector contributes to more than two-thirds of the total FMCG revenue sector.

The rising awareness, ease of access, and altering preferences have been the primary factors promoting market expansion in rural areas. The primary driver of the FMCG market will be the growth in rural spending on essential products.

In the Union Budget 2022-23, the government has used a game-changing approach to the "rural economy" through rural women empowerment, enhanced agri-credit aim, fisheries scheme, Agri start-ups, natural farming, and other initiatives, that could assist raise rural demand for the Indian FMCG sector.

Government Initiatives

Some of the major initiatives taken by the Government to promote the FMCG sector in India are as follows:

  • As per the Union Budget 2022-23:
    • Rs. 1,725 crore (US$ 222.19 million) has been allocated to the Department of Consumer Affairs
    • Rs. 215,960 crore (US$ 27.82 billion) has been allocated to the Department of Food and Public Distribution.
    • In FY22, the government approved the Production Linked Incentive (PLI) Scheme for Food Processing Industry (PLISFPI) with an outlay of Rs. 10,900 crores (US$ 1.4 billion) to help Indian brands of food products in the international markets.
  • The Government has allowed 100% Foreign Direct Investment (FDI) in food processing and single-brand retail and 51% in multi-brand retail.
  • This would bolster employment, supply chain and high visibility for FMCG brands across organised retail markets thereby bolstering consumer spending and encouraging more product launches. The sector recorded an FDI of US$ 20.84 billion between April 2000-June 2022.


Growth Factors

  • Growth of E-Commerce

Both urban and rural parts of India were impacted by the technological revolution. There has been a noticeable shift in demand as a result of e-commerce's accessibility across the country, in rural or urban locations. It provides more consumer convenience because users can quickly select and purchase things of their choice utilising apps and websites. Additionally, the home delivery option will drop the items to their residential addresses.

  • Value Augmentation

The rural retail sector and the rise in rural consumption also influence the FMCG market. As a result, 36% of its overall expenditures are on FMCG.  Additionally, it grew by double digits and reached 10.6% as a result of several government programmes, such as the hygiene categories, high agricultural production, reverse migration, and packaged staples. Several businesses, including tobacco, food and beverage, household and personal care, and others, support the FMCG industry.

  • Technology

The FMCG sector largely relies on market research since it enables it to identify consumer behaviour and field sales experts. Businesses can boost their sales success by using business intelligence, the cloud, and sophisticated field service management software. Moreover, the rising smartphone and internet usage will help residents of rural areas even more because it will be easier for them to access numerous e-commerce websites for online shopping.

  • Creation of Brand Communities

Presently, consumers may easily find other customers who have made the same transaction. As a result, companies are creating marketing strategies to build brand communities among customers who are interested in their products and share similar social, political, and cultural attributes.

Company Landscape

  • Dabur has announced to invest in nearly 9,000 villages in the second quarter of 2022-23 to take its overall coverage to over one lakh villages.
  • Tata Consumer Products Ltd. plan to increase the number of wholesalers and its reach into rural areas to increase the numbers significantly.
  • Categories that include staples and essentials such as basic edible oil, rice, atta and maida are likely to see volume recovery in the January-March quarter itself aided by rural recovery and out-of-home consumption. Demand is growing for soybean, mustard and sunflower oil and other staples. The acreage under wheat cultivation is 4% more than last year, 9% higher for mustard and 2-3% for rice. The crop position is good and market prices are higher too. So, farmers will get more money in their hands which will lead to higher spending.
  • The Coca-Cola Company plans to strengthen its distribution network in the rural area markets through the general trade channel. 
  • Under the project Shakti, Hindustan Unilever (HUL) imparts training to female micro-entrepreneurs, developing an entrepreneurial mindset and achieving financial independence. More than 1,60,000 Shakti entrepreneurs work closely with HUL in 18 different states.
  • By the end of FY24, Emami, the leading FMCG product manufacturer plans to reach the goal of 60,000 tier-3 towns, in order to double its rural coverage.
  • In February 2021, Nestle India announced plans to reach ~1.2 lakh villages (with each having a population of over 5,000) over the next 2-3 years. 
  • In November 2021, Flipkart signed an MoU with the Ministry of Rural Development of the Government of India (MoRD) for their ambitious Deendayal Antyodaya Yojana – National Rural Livelihood Mission (DAY-NRLM) programme to empower local businesses and self-help groups (SHGs) by bringing them into the e-commerce fold.
  • Companies are counting on recent budget announcements like the direct transfer of Rs. 2.37 lakh crore (US$ 30.93 billion) in minimum support payment (MSP) to wheat and paddy farmers and the integration of 150,000 post offices into the core banking system to expand their reach in rural India.

The Road Ahead
Rural consumption has increased, led by a combination of increasing income and higher aspiration levels. There is an increased demand for branded products in rural India. On the other hand, with the share of unorganised market in the FMCG sector falling, the organised sector growth is expected to rise with an increased level of brand consciousness, augmented by the growth in modern retail. Another major factor propelling the demand for food services in India is the growing youth population, primarily in urban regions. India has a large base of young consumers who form the majority of the workforce, and due to time constraints, barely get time for cooking. Online portals are expected to play a key role for companies trying to enter the hinterlands. The Internet has contributed in a big way, facilitating a cheaper and more convenient mode to increase a company’s reach. The number of internet users in India is likely to reach 1 billion by 2025. It is estimated that 40% of all FMCG consumption in India will be made online by 2020. E-commerce share of total FMCG sales is expected to increase by 11% by 2030. It is estimated that India will gain US$ 15 billion a year by implementing GST. GST and demonetisation are expected to drive demand, both in the rural and urban areas, and economic growth in a structured manner in the long term and improved the performance of companies within the sector.