Chennai: Consumer goods sector might witness a volume growth revival by fourth quarter of this year provided the central government increases its spending and its pay-outs under PM-Kisan scheme reach farmers. However, the slowdown has hit FMCG players differently — some have been hit badly while some have bucked the trend.
"We believe demand will pick up from Q4FY20 once payouts under direct transfer schemes and better monsoon lead to more money in the hands of consumers. Increase in spending by the central government as well as its government payouts to farmers under the PM-Kisan scheme, better monsoon along with good distribution will support volume growth. Roll out of GST's invoice reconciliation mechanism will further spur demand for the organised sector," finds Edelweiss Securities.
The volume growth in FMCG sector has slowed down in the wake of the rural slowdown, liquidity tightening and a dip in consumer sentiment. Further, weak overall macroeconomic scenario including lower government spending, liquidity crisis hurting wholesalers, lower procurement despite MSP hikes, and limited payout of the PM-Kisan.
"Third quarter of FY19 was characterised by slowdown in automobile as well as consumer durable sectors. Sales growth of consumer staples, however, remained resilient largely on account of direct transfer schemes and government led initiatives. But, the cookie crumbled in Q4FY19 as the government massively slashed its expenditure. This triggered deceleration in the rural economy,” said Abneesh Roy, Executive Vice President, Institutional Equities, Edelweiss Securities.