Urban-rural FMCG growth gap narrows in December quarter, says NIQ

Rural FMCG demand continued to outpace urban markets for the eighth quarter, but the gap narrowed as metro consumption improved and GST-related adjustments softened overall growth

The gap between Indian urban and rural fast-moving consumer goods (FMCG) market narrowed in the October-December quarter, market researcher NIQ said in its latest report.

 

While “rural markets continued to outpace urban consumption for the eighth consecutive quarter, the growth gap narrowed in OND (Oct-Nov-Dec) 2025,” the researcher stated.

 

Rural regions recorded 2.9 per cent volume growth, moderating against a higher base, while urban markets grew 2.3 per cent, “supported by recovery in metro consumption and normalisation in e-commerce demand”, it added. 

The overall market growth, however, moderated to 7.8 per cent on account of a higher festival season base and transition due to the change in goods and services tax (GST) rate cuts.

 

“Both price and volume growth softened sequentially, particularly within traditional trade, which experienced temporary supply and pricing recalibrations during the initial phase of implementation,” the report stated.

 

The FMCG market reported a 13 per cent growth in the preceding September quarter.

 

“The industry witnessed heightened activity following GST 2.0 implementation, with expectations of demand stimulus across categories,” said Sharang Pant, head of customer success – FMCG and tech & durables at NielsenIQ in India.

 

Nearly 60 per cent of the FMCG portfolio was impacted by the rate revisions, requiring coordinated pricing adjustments across manufacturers, distributors, and retailers. While these changes temporarily impacted traditional trade performance, organised channels adapted more quickly.

 

Across baskets, both Food and Home & Personal Care (HPC) saw moderation in volume growth during OND 2025.

 

Food consumption benefited from GST-driven price corrections and stabilisation in edible oil prices, helping it outperform consumption growth of the HPC segment.

 

While the Food category saw 2.8 per cent volume growth during the quarter, HPC recorded 1.9 per cent volume growth, “reflecting sharper moderation due to higher exposure to GST revisions”, the report stated.

 

Meanwhile, over-the-counter (OTC) categories posted relatively stronger consumption growth at 3.2 per cent, outperforming both Food and HPC, it added.

 

“While initial supply and pricing adjustments led to moderated consumption in the OND quarter, organised channels responded faster to structural changes. We expect the positive impact of GST 2.0 on consumption to become more visible from the March quarter onwards,” Pant added.

 

The e-commerce channel continued to gain strength in the December quarter, and now accounts for 6 per cent of urban FMCG sales.

 

In metro cities, e-commerce accounts for 14 per cent of all FMCG sales while in the top eight metros, it accounts for 18 per cent of all FMCG sales.

 

Meanwhile, “quick commerce — contributing over three-fourths of e-commerce FMCG sales — remained the key growth engine”, the report pointed out.