Indian FMCG Firms Project Muted Revenue Growth in FY25 Amid Rural Demand Pressure
India’s fast-moving consumer goods (FMCG) sector is expected to close the financial year 2024-25 with mid-to-high single-digit revenue growth as rural consumption struggles to regain momentum. According to Crisil Ratings, subdued rural demand and steady raw material prices will contribute to modest topline expansion, although operating margins are set to improve.
The rural segment—which accounts for 35–40% of the FMCG market—continues to face headwinds such as erratic rainfall and inflationary pressures. Despite a gradual recovery observed over the past two quarters, demand in rural India has not yet returned to pre-pandemic levels. Analysts expect only a mild revival, dampening volume-led growth, which is typically a key driver for the sector.
Crisil projects a 7–9% revenue growth for FMCG players in FY25, down from the 4–6% seen in FY24. The expected improvement will come largely from moderate volume growth of 4–6%, with price hikes remaining limited due to stable commodity costs and elevated competitive intensity, particularly from regional players in essentials such as edible oils and detergents.
On the profitability front, FMCG companies are likely to benefit from soft input prices and operational efficiencies. Operating margins are forecast to expand by 100–150 basis points in FY25, reaching pre-Covid levels of 21–22%. The decline in prices of key raw materials like palm oil and crude derivatives will continue to support margin expansion, along with reduced freight costs and controlled ad spends.
Urban demand is expected to remain robust, especially in the premium and discretionary segments, including personal care and packaged foods. Increased out-of-home consumption and premiumization trends will provide tailwinds for urban-focused portfolios.
While the long-term fundamentals for the FMCG sector remain intact, near-term growth will be tempered by uneven recovery in rural consumption. Sector players may need to sharpen their go-to-market strategies in rural regions and maintain a balanced portfolio mix to navigate the current economic landscape.
The analysis from Crisil is based on a sample set covering 40 FMCG companies in India.