The domestic fast-moving consumer goods (FMCG) market requires a quicker recovery in rural areas for it to grow in double digits, Sudhir Sitapati, managing director and chief executive officer of Godrej Consumer (GCPL), told Viveat Susan Pinto. He also pointed out that income inequality remains high and distress at the bottom of the pyramid must be tackled fast. Excerpts:
FMCG companies have been bullish about rural revival. Are you seeing a rural recovery?
For the last 2-3 years, I haven’t been quite sure of a rural revival. The green shoots in rural have not been visible. I believe the time has come for a rural stimulus now. I say this because domestic consumption growth is stagnant at 4%, even as the FY24 gross domestic product (GDP) growth stood at 8%. There are a lot of people — especially at the bottom of the pyramid — who don’t contribute to the GDP at all. And this is showing up in domestic consumption, which is not only a measure of consumption but also a measure of equality. The government is cognizant of the need for a consumption revival in rural areas. And I am optimistic that by Diwali, we may see some rural revival as the government may address these concerns in the Budget.
What can the Budget do to deal with rural distress?
I hope that the government can put more money in the hands of farmers and rural consumers through schemes such as PM-Kisan Yojana or a universal basic income. This segment has to be stimulated and I find that stakeholders today in the government and the industry are on the same page on this. Look at the pattern on discretionary spends. The top 20% of India are spending on cars, luxury goods and high-end homes. There is a boom in discretionary spends there. But in the next 80%, we are seeing stress.
Market research is also pointing to stress in urban areas. Can consumption revive quickly in urban and rural areas?
There are paint points in urban. But that is at the bottom of the pyramid again. There is a need for a focused approach to reviving consumption at the bottom of the pyramid in both urban and rural areas. Much of all this is a post-Covid-19 issue, which we were hoping would go away, but hasn’t yet.
How fast can the FMCG market bounce back to double-digit growth?
It will be a factor of domestic consumption. If consumption growth is 4%, FMCG growth is 1.1-1.2 times domestic consumption, which is 4.4-4.8%. If consumption growth goes up, so will FMCG consumption. But the catch here is that lower income groups also have to be a part of this growth cycle for FMCG to get back to double-digit growth.