FMCG Growth Outlook for FY26: Demand Revival to Drive Revenue and Profit
The Indian fast-moving consumer goods (FMCG) sector is poised for moderate growth in revenue and profitability in FY26, supported by a gradual revival in rural demand and stable input costs, according to the latest analysis by CRISIL Ratings. The sector, which experienced sluggish volume growth in recent years due to inflationary pressures, is expected to see improvement as consumer sentiment strengthens.
Revenue Growth to Reach 6-8%, Aided by Rural Recovery
According to CRISIL Ratings, FMCG revenue is projected to grow by 6-8% in FY26, compared to the subdued growth observed in previous years. This increase is attributed to a return of demand in rural markets, which had witnessed a slowdown owing to high inflation and weak agricultural incomes. As inflation eases and government policies support rural income, consumer spending on essential and discretionary products is expected to improve.
Urban markets will continue to drive premiumization trends, with consumers showing a preference for value-added and health-focused products. Growth in modern trade and e-commerce channels is also expected to play a crucial role in shaping consumer buying patterns.
Profitability to Improve as Input Costs Stabilize
Profitability for FMCG companies is anticipated to improve slightly, with EBITDA margins likely to expand by 50-60 basis points. Stable raw material prices, particularly for key commodities such as palm oil and crude derivatives, will provide relief after a period of high input cost volatility. Additionally, companies are expected to benefit from enhanced operational efficiencies and cost optimization measures initiated over the past two years.
However, the report cautions that aggressive competition and promotional pricing strategies could offset some margin gains, making cost management a critical focus for FMCG firms.
Outlook: Balancing Growth and Market Dynamics
The overall outlook for the FMCG sector remains positive, but challenges persist. While rural demand is set to revive, factors such as changing consumer preferences, increased competition from emerging brands, and evolving retail dynamics will shape the competitive landscape. Companies that effectively capitalize on rural recovery while continuing to drive urban premiumization will be in a stronger position to maintain steady growth.
With demand conditions improving and cost pressures