India's FMCG sector to see flat growth in 2020 due to Covid-19: Nielsen

Though the FMCG industry has shown some sign of improvements in June, but in the first half of the year the industry growth slipped to negative with 6% decline

India's fast moving consumer goods (FMCG) sector is expected to witness flat growth in 2020 following severe and extended lockdowns, restrictions on manufacturing units, social distancing norms and store closures, according to data analytics firm Nielsen.

Earlier, on April 30, in the middle of the lockdown, Nielsen had slashed the growth forecast for the FMCG sector by almost half to 5-6 per cent for 2020 citing adverse impact of the coronavirus pandemic.

Though the FMCG industry has shown some sign of improvements in June, but in the first half of the year (January-June) the industry growth slipped to negative with 6 per cent decline.

"Keeping these unprecedented dynamics in the market, Nielsen has revised its outlook and is expecting the year to be in the flat growth range (-) 1 per cent to 1 per cent for branded FMCG industry in India, as against a 5-6 per cent growth projected earlier this year," said Nielsen.

This is the second revision of the forecast by Nielsen for 2020, amid coronavirus pandemic and subsequent disruption in the market and supply chain.

Nielsen had on January 21, projected a 9 to 10 per cent growth for the FMCG industry with a "stable" outlook on the back of favourable macroeconomic factors.

"The bellwether FMCG industry, which was trying to revive from a difficult 2019, had a significant hit in the April-June quarter with a 17 per cent decline in sales value as compared to the same quarter of 2019," said Nielsen.

However, Nielsen expects an uptick in demand in October-December quarter during the festive seasons as food categories are expected to see a higher growth, while July-September quarter is also likely to see some growth.

According to the report, the FMCG industry would have rural dividends, which has recovered and bounced back from the Covid-19 impact.

"Rural India has been comparatively insulated from Covid-19 so far, however its spread is now reaching the hinterland. Having said that, we do expect an overall positive uptick due to reverse migration," said Nielsen.

Moreover, Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA) wages are at an all time high and rural disbursement against the programme is more than double of same period last year, it added.

Rural India contributes around 36 to 37 per cent of the total FMCG sales, bulk of which is contributed by food items.