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The fast-moving consumer goods (FMCG) sector is the 4th largest sector in the Indian economy with Household and Personal Care accounting for 50 percent of FMCG sales in India. Growing awareness, easier access, and changing lifestyles have been the key growth drivers for the sector. The urban segment (accounts for a revenue share of around 55 percent) is the largest contributor to the overall revenue generated by the FMCG sector in India However, in the last few years, the FMCG market has grown at a faster pace in rural India compared with urban India. Semi-urban and rural segments are growing at a rapid pace and FMCG products account for 50 percent of total rural spending.


The Retail market in India is estimated to reach US$ 1.1 trillion by 2020 from US$ 840 billion in 2017, with modern trade expected to grow at 20 percent - 25 percent per annum, which is likely to boost revenues of FMCG companies. Revenues of the FMCG sector reached Rs 3.4 lakh crore (US$ 52.75 billion) in FY18 and are estimated to reach US$ 103.7 billion in 2020. The sector witnessed a growth of 16.5 percent in value terms between July-September 2018; supported by moderate inflation, an increase in private consumption, and rural income.


The government has allowed 100 percent Foreign Direct Investment (FDI) in food processing and single-brand retail and 51 percent in multi-brand retail. This would bolster employment and supply chains, and also provide high visibility for FMCG brands in organized retail markets, bolstering consumer spending, and encouraging more product launches. The sector witnessed healthy FDI inflows of US$ 13.63 billion, from April 2000 to June 2018. Some of the recent developments in the FMCG sector are as follows:

  • Patanjali will spend US$743.72 million in various food parks in Maharashtra, Madhya Pradesh, Assam, Andhra Pradesh, and Uttar Pradesh.
  • Dabur is planning to invest Rs 250-300 crore (US$ 38.79-46.55 million) in FY19 for capacity expansion and is also planning to make acquisitions in the domestic market.
  • In May 2018, RP-Sanjiv Goenka Group created a Rs 1 billion (US$ 14.92 million) venture capital fund to invest in FMCG start-ups.
  • In August 2018, Fonterra announced a joint venture with Future Consumer Ltd which will produce a range of consumer and foodservice dairy products.


Some of the major initiatives taken by the government to promote the FMCG sector in India are as follows:

  • The Government of India has approved 100 percent Foreign Direct Investment (FDI) in the cash and carry segment and in single-brand retail along with 51 percent FDI in multi-brand retail.
  • The Government of India has drafted a new Consumer Protection Bill with special emphasis on setting up an extensive mechanism to ensure simple, speedy, accessible, affordable, and timely delivery of justice to consumers.
  • The Goods and Services Tax (GST) is beneficial for the FMCG industry as many of the FMCG products such as Soap, Toothpaste, and Hair oil now come under the 18 percent tax bracket against the previous 23-24 percent rate.
  • The GST is expected to transform logistics in the FMCG sector into a modern and efficient model as all major corporations are remodeling their operations into larger logistics and warehousing.


Following are the achievements of the government in the past four years:

  • The number of mega food parks ready increased from 2 between 2008-14 to 13 between 2014-18.
  • Preservation and processing capacity increased from 308,000 during 2008-14 to 1.41 million during 2014-18.
  • The number of food labs increased from 31 during 2008-14 to 42 during 2014-18.


  • Rural consumption has increased, led by a combination of increasing incomes and higher aspiration levels; there is an increased demand for branded products in rural India. The rural FMCG market in India is expected to grow to US$ 220 billion by 2025 from US$ 23.6 billion in FY18. In FY18, FMCG’s rural segment contributed an estimated 10 percent of the total income and it is forecasted to contribute 15-16 percent in FY 19.
  • On the other hand, with the share of the unorganized market in the FMCG sector falling, the organized sector growth is expected to rise with the increased level of brand consciousness, also augmented by the growth in modern retail.
  • Another major factor propelling the demand for food services in India is the growing youth population, primarily in the country’s urban regions. India has a large base of young consumers who form the majority of the workforce and, due to time constraints, barely get time for cooking.
  • Online portals are expected to play a key role in companies trying to enter the hinterlands. The Internet has contributed in a big way, facilitating a cheaper and more convenient means to increase a company’s reach. It is estimated that 40 percent of all FMCG consumption in India will be online by 2020. The online FMCG market is forecasted to reach US$ 45 billion in 2020 from US$ 20 billion in 2017.
  • It is estimated that India will gain US$ 15 billion a year by implementing the Goods and Services Tax. GST and demonetization are expected to drive demand, both in the rural and urban areas, and economic growth in a structured manner in the long term and improve the performance of companies within the sector.