FMCG firms may be hit

Apr 28 2014, 05:57 IST
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SummaryWith farm income growth tipped to slow and real rural wages decelerating, manufacturers of both consumer staples and durables could see their revenues under pressure.

With farm income growth tipped to slow and real rural wages decelerating, manufacturers of both consumer staples and durables could see their revenues under pressure. Rural consumers had become richer over the past few years thanks to big spends by the government on infrastructure projects, which created jobs, and employment guarantee schemes, which resulted in a sharp rise in wages. Moreover, the government increased support prices for crops, which drove up farm incomes. FMCG firms, as also makers of cars and two-wheelers, have reaped the benefits of higher spends in the hinterland and have come to rely heavily on rural catchments for revenues. However, volumes in these markets have been tapering off in the last six to eight months, and the golden years for rural growth of 2009-12, when volumes grew 7-9%, are unlikely to return soon.

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