India's richest state Maharashtra and the most populous Uttar Pradesh are among the states leading the ongoing economic slowdown in the country. The heart of the nation Madhya Pradesh, capital New Delhi's neighbour Haryana and the biggest NE state Assam too are among the states where consumption is projected to slump this year, according to market research firm Nielsen India's report titled 'India FMCG Growth Snapshot'.
Fast Moving Consumer Goods (FMCG) sector will face a slowdown in 2019 with the deceleration being driven by North and West zones.
"Taking a regional lens - the slowdown is driven by north and west zones, where growth has come down to single-digit in Q2. Haryana, Madhya Pradesh, Uttar Pradesh, Maharashtra and Assam are leading the slowdown," said Sunil Khiani, Head of Retail Measurement Services, Nielsen South Asia in the report.
It added that the rural downturn in these markets is reaffirmed in key macro-economic indicators comprising deceleration in rural output, reduced government spending and ill-timed rainfall affecting crops in most North Indian markets.
Meanwhile, the rural markets have shown signs of a growth slowdown more than the urban areas even though they continue to grow ahead of the urban markets. "Rural is slowing down at double the rate of urban," noted Nielsen. Due to this, the upcoming June quarter earnings of some of India's biggest FMCG companies might get affected.
The deceleration in sales of FMCG products in the rural areas was 37% of total spends for the sector and happened at a faster rate as compared to urban markets. The rural growth plunged 10.3% in the April-June quarter of 2019, down from 12.7% logged last year.
"Rural India has historically been growing around 3 to 5 percentage points faster than urban on account of increasing affordability, availability and demand. However, rural growth is slowing down at double the rate of urban in recent quarters. This has brought rural growth closer to urban growth in Q219," Nielsen noted.
Nielsen India in its 2019 report has estimated the FMCG sector's growth rate to be in 9-10% range as against its previous assessment of 11-12% on account of softening consumption for the third straight quarter which is led by a sharp rural deceleration.
The report further said that the food categories are likely to grow at a higher rate of 10-11%, whilst personal care and home care segments are expected to expand in the 7-8% range. The FMCG sales grow 10% in 2nd Quarter (April-June) of 2019 going towards a slowdown, Nielsen India said its quarterly insight reports.
The report in its outlook has forecasted the FMCG growth in July-September at 7-8% and nearly 8% in the second half of 2019 (July-December). It mentions monsoons, budget provisions, low base effect and government policies as contributing factors that will affect the FMCG growth story.