The prediction of good rains this year could spur rural recovery, fast-moving consumer goods (FMCG) companies said on Monday, after the India Meteorological Department (IMD) forecast an above-normal monsoon this year.
This is the second forecast of a good monsoon for calendar year 2024. Private weather agency Skymet said last week the country would see normal monsoon rainfall, touching 102% of the long-period average (LPA). IMD has forecast rainfall at 106% of the LPA.
The prospect of good rainfall is a relief for farmers, companies and consumers alike who have been grappling with uneven rainfall, El Nino conditions and food inflation over the last few years.
The flip side of a normal or above-normal rainfall, say some experts, is the likelihood of flooding in urban and rural areas, which could also hurt the harvest season.
“Good rainfall augurs well for FMCG since kharif harvests will improve and so will farm incomes. With rural demand beginning to look up, a normal monsoon may aid rural recovery,” Krishnarao Buddha, senior category head, Parle Products, said.
Market researcher NielsenIQ had pointed to a rural recovery in the three-month period between December 2023 and February 2024, saying that rural markets have outperformed urban ones by 150-200 basis points in terms of volume growth. Figures for March 2024 not yet been released.
Companies such as Marico, Godrej Consumer (GCPL) and Dabur have said the domestic FMCG market will recover in the second half of the 2024-25 financial year, led by stable macro-economic indicators.
“The prospect of a normal monsoon instills a sense of optimism for FMCG firms,” Aasif Malbari, chief financial officer, GCPL, said. “It promises to bolster rural demand, which is key to our industry’s growth trajectory,” he said.
“With a positive outlook for the rabi crop harvest and the monsoon forecast to be normal, we expect consumption to pick-up in the coming months,” Dabur India said.
Over a third of the FMCG industry’s sales come from rural areas. Sector analysts and experts for long have said that for the industry to log strong double-digit growth, rural markets have to outperform urban markets by a significant margin.
“The forecast of a good monsoon this year will definitely boost prospects for FMCG firms. But the distribution of rainfall over the four-month period between June and September will be critical,” G Chokkalingam, founder and MD at Mumbai-based Equinomics Research, said.
