India face slowing rural spend

Mumbai: A sharp pullback in spending by consumers in rural India is one of the key reasons for waning demand of everything from spices to soaps, says a new study.

The result of the tighter spending by the rural consumers, who account for 37% of all purchases of daily staples, value growth of fast-moving consumer goods slowed to 10% in the second quarter of 2019 from a high of 16.2% in the third quarter of 2018. Volumes too slowed as expansion cooled to 6.2% from 9.9% in the first three months of this year, according to the study by Neilsen Holdings Plc.

Rural consumers accounted for 57% of that slowdown, the report said.

The finding mirrors the slowdown in India, which lost the fastest-growing major economy title recently after gross domestic product rose 5.8% in the first quarter of 2019, compared with China’s 6.4% expansion in the same period. The study is significant, given that India doesn’t release retail sales data.

Fading advantage of small manufacturers also contributed to the slowdown in FMCG segment, according to the study. On a net basis, manufacturers who went out of business increased to 5,800 in the second quarter of 2019 from 4,300 in the third quarter of last year, the report said.

Nielsen revised its 2019 forecast for FMCG growth to be in a range of 9%-10%, after the first-half performance undershot its baseline prediction by 1 percentage point at 12%.