FMCG Sector in India: Key Trends and Economic Drivers

Introduction

India’s Fast-Moving Consumer Goods (FMCG) sector is driven by tech advancements, shifting consumer preferences and the rapid rise of digital commerce. FMCG refers to everyday products that are affordable, sell quickly, and have a short shelf life. With increasing consumer demand for premium, health-conscious, and sustainable products, the growth of the FMCG industry in India will depend on companies' ability to innovate, integrate advanced technologies, and optimize supply chain efficiency.

To put things in perspective, the FMCG sector is the 4th largest in India, contributing ~3% to GDP and providing jobs to nearly 3 million people. CRISIL projects the Indian FMCG sector to grow 7–9% by revenue in FY 2025, reaching approximately $132 billion in total revenue for the year. This growth will be driven by rising disposable incomes, rural penetration, and e-commerce expansion.

Financial Performance of NIFTY FMCG Companies

FMCG Sector Stocks in India:

Source: Screener and Dhan - as on 13th March 2025

Key Financial Insights:

• Higher Price-to-Earnings Ratio(P/E): FMCG stocks tend to trade at high P/E ratios, and there’s a good reason for that. These companies have strong brand loyalty, steady demand (even in tough times), and solid pricing power. Investors love them because they offer consistent earnings growth and a defensive play during economic downturns.
• Steady Sales Growth Over the Years: Even though FMCG is a mature sector, it keeps growing at a healthy pace. What’s driving this? Urbanization, rising e-commerce adoption, and deeper penetration into rural markets. Plus, the shift towards healthier foods, premium personal care, and hygiene products has given the industry a solid boost.
• Why FMCG Stocks Have High P/B Ratios: These companies aren’t just selling everyday products—they're building brands, investing in R&D, and expanding into premium product categories. That’s why their Price-to-Book (P/B) ratios tend to be on the higher side. Essentially, they’re not just valued for their assets but also for the power of their brands and future growth potential.

Macroeconomic Factors Impacting FMCG in 2025

Resilient Global Spending despite Trade Tensions

The global GDP growth is expected to moderate at 3.3% in 2025, lower than the 3.7% average of the past decade. The key drivers of this growth will be India (6.4%), China (4.9%), and the U.S. (2.4%). NIQ anticipates that global consumers will spend $3.2 trillion more in 2025, representing nearly 6% growth compared to 2024.

Here’s what’s shaping the consumer behaviour worldwide:

• More spending power: Declining global inflation (6.8% in 2023 →5.9% in 2024→4.5% in 2025) is putting more money in people’s pockets.
• Tech-driven shopping: AI is playing a bigger role, with 40% of consumers using AI to shop.
• Side hustles & savings focus: A whopping 64% of people are looking for extra income to maintain their spending habits.
• Health in Focus: With 31% of consumers considering weight-loss medications, the demand for health-focused FMCG products is stronger than ever.

But there are challenges too—protectionist measures under the Trump Administration and geopolitical tensions in the Middle East could push costs higher. India, importing 57% of its edible oil needs, will especially be vulnerable to price volatility and supply chain disruptions.

Easing Food Inflation amid Commodity Price Volatility

If 2024 was all about inflationary pressures, 2025 is shaping up to be a different story. Inflation in India has been cooling off, dropping from 6.2% in Oct 2024 to 3.6% in Feb 2025.

To explore more and get the latest data, check out India Macro Indicators.

Here’s what’s behind the decline:

• Vegetable prices- They plummeted by 15.7% MoM in January 2025, contributing to 97% of the inflation drop.
• Food inflation- Consumer Food Price Inflation (CFPI) has been steadily declining since October 2024 from 10.9% to a 20 month low of 3.8% in February 2025, making daily essentials more affordable.
• Core inflation- Core inflation climbed slightly to 4.0% in February 2025, from 3.6% in December 2024.

However some ongoing risks pertain that includes:

• Volatile edible oil prices remain a concern for FMCG manufacturers. 
• Rising wheat prices could put pressure on FMCG profit margins.

RBI Rate cut expected to Boost Consumption

After nearly five years, the Reserve Bank of India (RBI) finally cut the repo rate in February 2025—a 25 basis point reduction to 6.25%. This aligns with our macroeconomic outlook for 2025, where we predicted this rate cut. Our outlook continues to anticipate three rate cuts in 2025.

Why does this matter?

• Lower borrowing costs → Businesses can invest in expansion.
• Boosts consumer spending → More demand for both essential & discretionary products.
• Cheaper financing → FMCG firms can upgrade production & supply chains.

Explore More: Check out the Interest Rate Outlook Index on India Macro Indicators for latest insights.

Rupee Depreciation Threatens Import Costs

In 2024, the rupee weakened by about 3%, with another ~2% drop in early 2025. This decline will add pressure on importing FMCG companies. India’s heavy reliance on edible oil imports- meeting 57% of domestic demand- further heightens the sector’s sensitivity to currency fluctuations.

To counter this, the Indian government has launched a $1.2 billion initiative to double domestic edible oil production in the next seven years.

Rural Consumption outperforming Urban

For the past four quarters, consumption in the rural areas of India has been outpacing urban consumption. Rural FMCG sales jumped 9.9%, nearly double the 5% growth in urban areas, because of strong Kharif harvest and promising Rabi sowings. Moreover, the impact of the Union Budget 2025 tax reliefs is clear in consumer sentiment, with the CMIE Index of Consumer Sentiments (ICS) rising by 1.1% in January 2025, bouncing back from a 1.6% dip in December 2024- as shown in the chart below.

An “Index of Consumer Sentiments” is an economic indicator that measures how positive or negative the consumers are about the current and future state of the economy. A figure above 100 indicates positive consumer confidence about future economic conditions. A figure below 100 indicates negative consumer confidence.

How FMCG Performed in 2024 

The NIFTY FMCG sector has lagged behind both the NIFTY 50 and the Nifty India Consumption Index over the past year, reflecting a shift in consumer spending toward discretionary products. FMCG companies have had a tough time in 2024, largely due to rising raw material costs.

Period: 1st March 2024 to 28th February 2025

Price and Volume Growth in 2024 (Y-o-Y)

Here’s a snapshot of how FMCG pricing and sales volumes changed throughout 2024:

Source: NielsenIQ, FMCG Quarterly Snapshot Q4

Sub-sector Trends

Source: Deloitte-FICCI Report Oct’24 

Investment and Expansion Strategies of FMCG Companies

• Boosting Local Manufacturing

  To tackle supply chain challenges, FMCG companies are ramping up local production and cutting down on import dependency. Government initiatives like ‘Make in India’ and PLI schemes are further driving domestic manufacturing, making supply chains more resilient.

• Omnichannel Expansion

  Consumers are shopping both online and offline, and FMCG brands are making sure they stay ahead by integrating both channels smoothly. Hyperlocal deliveries, quick commerce (10-minute delivery), and AI-driven customer insights are becoming key strategies to improve shopping experiences and boost customer retention.

• Mergers and Acquisitions

  Big FMCG players are eyeing strategic partnerships and acquisitions to fuel growth. Emerging D2C brands are a hot target, as global FMCG giants look to expand their digital presence and penetrate new markets faster.

Final Thoughts

2024 proved to be a challenge for the Indian FMCG Sector mainly because of inflationary pressures and consumption disruptions. Going into 2025, global tensions on Trump’s return and volatile commodity rates may pose a threat.

However, the macroeconomic environment of the Indian economy appears to be supportive for the FMCG sector. Slowing inflation and rising rural consumption can drive growth in 2025. Companies investing in innovation, direct consumer engagement and supply chain efficiency will be best positioned for success.

FAQs

• What is FMCG?
  FMCG stands for Fast-Moving Consumer Goods, which includes everyday products like food, beverages, personal care, and household items.
• Why is FMCG called “fast-moving”?
  FMCG products sell quickly because they are used daily and have a short shelf life.
• How big is the FMCG sector in India?
  The FMCG sector is the 4th largest in India, contributing ~3% to GDP and employing around 3 million people.
• What is the expected growth of the FMCG sector in 2025?
  The sector is expected to grow by 7–9% in revenues in FY 2025, reaching around $132 billion.
• What is premiumization in FMCG?
  Premiumization refers to consumers opting for higher-end, better-quality products, like organic foods, skincare, and eco-friendly cleaning products.
• Which are the biggest FMCG companies in India?
  Major companies include ITC, Hindustan Unilever, Nestlé, Britannia, and Tata Consumer.
• Why do investors prefer FMCG stocks?
  FMCG stocks are considered safe investments because they provide stable growth, steady demand, and good returns over time.

References:

1] IBEF Report- Thriving FMCG Industry in India Driving Its Sales 
2] CRISIL- FMCG Sector to see revenue growth of 7-9% this fiscal 
3] IMF World Economic Outlook Update- Global Growth: Divergent and Uncertain 
4] Nielsen IQ- Mid Year Consumer Outlook- Guide to 2025 
5] IMF World Economic Outlook, April 2024- Steady but Slow: Resilience amid Divergence 
6] Reuters- India’s edible oil demand to rise despite hefty import duty hike 
7] India Marcoindicators- Consumer Price Index- Food 
8] India Marcoindicators- Consumer Price Index- Core 
9] Press Information Bureau- Cabinet Approves of National Mission on Edible Oils 
10] Reuters- Rural demand, price hikes power India consumer goods sector growth