Since the last few quarters, the Fast Moving Consumer Goods (FMCG) sector has been facing some hard times. In terms of revenue growth, the ongoing financial year could be worst than it has faced in the last 15 years. These issues are occurring due to effects of government initiatives which have been slower than expected, the slowdown in the agriculture sector, concerns related to liquidity and lower employment rate among the Indian youth.
The Credit Suisse had recently issued a report which stated that since 2018, the agriculture Gross Development Product (GDP) had been observed the lowest in the last 15 years. As the Non-Banking Financial Corporations (NBFCs) faced different kinds of pressures, the liquidity started worsening post-October 2018. Due to demonetization and introduction of Goods and Service Tax (GST), the small businesses started facing business challenges. It was further aggravated due to the issue of liquidity. These factors are now having a simultaneous impact on the economic situation of India.
The report further stated that Pradhan Mantri Kisan Samman Nidhi (PMKSN) which is a direct roll-out of income transfer process has been slower than as it was expected. Until September 2019, the scheme has covered approximately 50% of the intended beneficiaries. As per a recent analysis, PMKSN can provide a boost of to overall FMCG growth by 2 to 3%. However, still, there would be a lag after full effect.
Several Global Financial Major, the FMCG sector started facing slowdown during 2016. However, it got camouflaged first due to trade disruptions that occurred during 2017. It had taken place due to demonetization and introduction of GST. During FY17, the country faced a low based effect which also led to high growth in FY19.
This data is essential since several FMCG companies have witnessed the multi-quarter low in the volume growth terms. Hindustan Unilever Limited (HUL) which is the largest FMCG entity in India, registered a growth of 7% when the first quarter had ended on June 20 this year.