Credit ratings agency, Crisil Ratings in its latest report has said that India's fast moving consumer goods (FMCG) sector is likely to post a net revenue growth of 11-12 percent in fiscal 2019, up 300-400 basis points compared with 8 percent in fiscal 2018, on the back of a revival in rural demand and new product launches. It noted that this will lead to a significant improvement in the operating performance of FMCG companies and benefit their credit profiles.
The ratings agency has stated that the rural economy may get a leg-up from the government's decision of increasing the minimum support price (MSP) for pulses, oil seeds and paddy for the upcoming kharif season. Besides, a favourable monsoon rainfalls and a more non-agriculture rural employment, will increase the disposable income of the farmers and consumption demand. From the marketers' side, it said that continuing product launches and greater acceptance of ayurvedic and herbal products will also help. Therefore, it pointed out that revenue growth from the rural segment which contributes 40-45 percent of the total income of the sector, will improve to 15-16 percent in fiscal 2019 compared to 10 percent estimated for fiscal 2018.
According to the report, growth had recovered partially from the 5-percentage point range during fiscals 2016 and 2017, a period that saw sluggish rural demand resulting from weak monsoons, intense competition and demonetisation. On the other hand, it noted that revenue growth from the urban segment is likely to stay steady at 8 percent in FY19. It also said that while mid-sized and medium-sized firms will have an edge because of better operating efficiencies in the GST regime and may clip at 15-17 percent, large firms are seen growing topline by 300-400 bps to 11-12 percent.