Urban Inflation Set to Weigh on FMCG Volume Growth in Q4FY25
India’s fast-moving consumer goods (FMCG) sector is projected to witness a moderation in volume growth during Q4FY25, driven primarily by persistent urban inflation and uneven demand recovery. While rural markets continue to demonstrate signs of stability, a weakness in discretionary urban spending may dampen overall performance for the industry.
According to analysts tracking the sector, the March 2025 quarter is expected to deliver low single-digit volume growth year-on-year for most FMCG players. Urban markets—typically accounting for a stronger share in premium and discretionary categories—are showing strain due to inflationary pressures, while rural demand remains on a gradual recovery path aided by favourable agri-inflation and government welfare initiatives.
Industry data suggests that staple categories such as packaged foods, detergents, and personal care products may continue to benefit from rural resilience. However, categories heavily reliant on urban consumption, including beverages, cosmetics, and home care, could feel the pinch as consumers re-prioritize spending amid elevated cost pressures.
In addition, the sharp decline in raw material prices seen in previous quarters is beginning to stabilize. This may limit margin tailwinds for FMCG companies in Q4FY25, particularly those unable to drive operating leverage through strong volume growth. Firms are increasingly expected to shift focus back to innovation, premiumization, and targeted pricing strategies to safeguard profitability.
Despite these challenges, select players with balanced rural and urban exposure or diversified portfolios are likely to outperform peers, benefiting from category expansion and brand strength. Companies with enhanced distribution capabilities and digital initiatives aimed at smaller towns may also see better traction as consumers beyond metros continue to contribute meaningfully to topline growth.
Looking ahead, industry experts emphasise the importance of monitoring rainfall forecasts and pre-election economic sentiment, both of which will likely influence rural incomes and consumption patterns in the coming quarters. Long-term prospects for the FMCG sector remain anchored to India’s expanding middle class and increasing penetration across underserved regions, yet short-term headwinds may constrain headline performance in the final quarter of FY25.