FMCG Sector Growth Moderates Amid GST Transition
India's fast-moving consumer goods industry experienced a slowdown in growth momentum during the September quarter, with volume expansion easing to 5.4 percent according to the latest data from NielsenIQ. The market research firm attributed this moderation to disruptions caused by changes in Goods and Services Tax rates, even as value growth climbed to 12.9 percent during the same period.
Rural Markets Continue Outperformance
Rural India maintained its position as the primary growth driver for the seventh consecutive quarter, expanding at 7.7 percent year-on-year, though this represented a slight softening from the previous quarter's 8.4 percent growth. In contrast, urban markets recorded a more modest 3.7 percent volume increase. The rural segment, which accounts for approximately 38 percent of total FMCG demand, continues to be driven primarily by affordability considerations.
The gap between rural and urban growth rates narrowed during the quarter as smaller urban towns showed emerging signs of recovery, even while sequential growth in major cities slowed. The report highlighted that metropolitan areas witnessed continued decline in offline sales as consumers increasingly shift toward e-commerce platforms.
Pricing and Pack Size Dynamics
The overall market recorded a 7.1 percent increase in prices alongside the 5.4 percent volume growth. Notably, unit growth exceeded volume growth, indicating stronger consumer preference for smaller pack sizes, likely driven by budget constraints and value-seeking behavior.
Sharang Pant, Head of Customer Success – FMCG at NielsenIQ India, emphasized that the sector "continues to demonstrate resilience" with rural markets remaining the "cornerstone of volume expansion." He also identified e-commerce as a "key growth engine" particularly in the top eight metropolitan areas.
Segment-Wise Performance and Outlook
The transition to GST 2.0 temporarily slowed growth in the home and personal care segment, which includes products like soaps, shampoos, creams, dental care items, diapers, and household products. HPC volumes grew by 5.5 percent during the quarter.
Food consumption remained steady at 5.4 percent, driven primarily by higher volumes in staple categories, while impulse and habit-led categories experienced declines. Small manufacturers continued to support sector growth with steady expansion across both food and HPC categories, while larger players witnessed a slowdown in consumption.
E-commerce's share in FMCG sales increased by one percentage point across metropolitan areas, although the third quarter of 2025 saw a slight easing in its volume growth. Modern trade channels showed signs of revival despite the broader challenges.
With inflation showing signs of cooling, NielsenIQ expects consumption to maintain positive momentum, though the full effects of GST changes may continue to play out over the next two quarters. The sector's ability to adapt to changing consumer preferences and navigate regulatory transitions will be crucial for sustained growth in the coming months.
