The ongoing slowdown in fast-moving consumer goods is expected to be reversed in as soon as three months thanks to more money in the hands of farmers due to good monsoon and Narendra Modi government’s flagship PM-KISAN scheme.
The ongoing slowdown in fast-moving consumer goods is expected to be reversed in as soon as three months thanks to more money in the hands of farmers due to good monsoon and Narendra Modi government’s flagship PM-KISAN scheme. “India has had among the best monsoons in recent years and reservoir levels are well above past 10-year average. PM-Kisan enrolments are rising and could boost rural incomes in 2HFY20,” a recent report by BNP Paribas said. Further, the government is trying to allay concerns regarding liquidity crunch which could further help in bolstering the demand, the report added. The situation is expected to get better as early as the second half of FY20.
The government is also working to get speedy disbursals to farmers under the PM-KISAN scheme to provide a fillip to rural spending. As farmers in 13 states are yet to receive the third tranche of PM-KISAN disbursals, Finance Minister Nirmala Sitharaman has taken stock of the situation and has directed government officials to look into the matter, The Indian Express reported this week. According to BNP Paribas report as well, concerns still remain regarding unsatisfactory rural wage growth, low food inflation, employment data, dipping consumer sentiment. Highlighting certain risks, the report said: “The employment situation seems to be worsening … Low MSP hike and high inventory with Food Corporation of India might limit government’s ability to support agricultural commodity prices … Rural wage growth and food inflation have remained low,” the said.
Earlier, several leading FMCG companies including Dabur and Marico had said that their sales will depend upon how monsoon pans out in 2019. Godrej Consumer Products Limited had also said in the 1QFY20 commentary that “if the monsoon picks up, that should at least alleviate rural stress and the government is also giving a lot of push to get the rural growth back on track”.
While FMCG slowdown made a lot of headlines this year, recent reports have said that the situation was not as bad as portrayed. For certain products, the slowdown is emanating from a shift in consumer preference from high-end branded products towards good quality products of small companies which are not listed, a recent research note by SBI showed. “Despite all the noise on slowing growth from several quarters, we don’t see a significant difference in FMCG 1QFY20 results from the long-term trends,” BNP Paribas report said.