Bharat is outpacing India in FMCG growth trends with demand in the rural areas at three times the national average in June.
Nielsen has revised the forecast for the FMCG sector for the financial year 2020 to flat compared to its earlier forecast of a growth of 5-6 per cent.
As per Nielsen Q2 2020 FMCG growth snapshot data for the FMCG sector, rural areas grew three times of the all India numbers in June. While the national growth numbers were at 4.5 per cent, rural India grew at 12.5 per cent with urban areas at a miniscule .04 per cent. For the quarter, April-June, growth was in negative territory at 17.1 per cent
for the national average while rural fell much less at 11.2 per cent while the decline was more pronounced in urban areas at 20.4 per cent.
According to Nielsen, lower COVID incidence, government stimulus and agricultural impetus has boosted rural sentiments. Some of the measures include Rs 40,000 crore increase in allocation of MGNREGA, 116 districts of UP, Jharkhand, Odisha, MP, Rajasthan & Jharkhand, included in the ‘Garib Kalyan Rojgar Abhiyan’ – to ensure opportunities to the migrant-labourers as per their skill set, upskilling of three lakh migrant workers with short-term programmes and Rs 1 lakh crore agri infrastructure Fund for farm gate infrastructure for farmers. A good monsoon and higher sowing of crops have aided the rural sector.
The strong rural growth has also been led by reverse migration hotspots as workers moved back from the cities to their homes in the villages due to the lockdown and Covid worries.
On the future outlook, Nielsen says that festivities will be an important factor. The second half of the year has some of the big festivals across India. Spends are expected to revive during this time to compensate for the loss of dine-out and entertainment. Food categories are expected to see a higher growth because of this.
It estimates that loss of employment will hurt consumption. Though unemployment has come down post hitting a 24 per cent peak in April/May it still continues at 11 per cent level. Loss of jobs across different sectors is expected to hit consumption demand, it said.
The scenario remains robust for the rural sector. There are lower COVID cases in rural areas and reverse migration expected to give a positive uptick. In addition, MNREGA wages are at an all time high, rural disbursement is more than two times of same period last year, the progress of the southwest monsoon so far has been bountiful and flood impact very low compared to last year, restricted to 2-3 states.
There is a positive boost for agriculture with 40-60 per cent higher water availability in reservoirs, increased sowing area coverage. The Rabi harvest in April was good and with a good monsoon Kharif harvest is expected to augurs well too and to the MSP prices for crops have also seen a significant increase.
For the urban areas, with continued relaxation of lockdown businesses, offices, malls and entertainment centres opening up and expected to play a major role in creating positive sentiments in urban areas.