In yet another index of the overall slowdown of the Indian economy, a Nielson survey on the FMCG sector, titled FMCG Growth Snapshot, showed a considerable drop in sales growth in the rural sector.
Some years ago, many Indian businesses felt that there was more money to be made by moving towards the rural markets and not just cling to the metropolitan and major cities. This move paid off, and the higher disposable income in the hands of the population in these towns was fully leveraged across product segments. Just last year, the consumer goods segment grew 20% in rural India in the second quarter, ending September. For the same quarter this year, the rate has fallen to 5%. This rate of growth has been the worst in the last seven years, the report noted.
Rural markets contribute to more than a third of FMCG sales in the country. The July-September quarter saw urban markets register slightly higher growth at 8%. In the past few years, the trend the has been that the percentage in the rural markets is higher.
When considered in terms of the value of products sold on a quarter to quarter basis, the figure this year — 7.3% — was less than half of the 16.2% clocked last year. The significant finding in this Nielson report is that the distribution of products itself has been down. To put this in perspective, it's not that the products had reached rural retail counters from the manufacturers via the distribution network and were not sold to customers from there. Here, the distributors called for fewer products and limited their holdings at their ends.
When compared on a regional basis, the report tends to suggest that the South has fared better than the North.
Nielson, however, has still stuck to its prediction that the FMCG sales growth for all India will be around 9% to 10%.