How Recession in the US affects FMCG Sector in India

By Ms. Namisha Aggarwal

The US 2022–2023 recession is having a significant impact on the fast-moving consumer goods (FMCG) sector in India. The FMCG sector in India is heavily dependent on exports, and the US is one of the major markets for Indian FMCG products. The recession in the US is likely to lead to a decline in demand for Indian FMCG products, which will have a negative impact on the Indian FMCG sector. One of the major impacts of the US recession on the Indian FMCG sector is a decline in exports.

The US is one of the largest markets for Indian FMCG products, and a decline in demand in the US will lead to a decline in exports of Indian FMCG products. This will result in a decline in revenue for Indian FMCG companies and a decline in employment in the sector

Another impact of the US recession on the Indian FMCG sector is a decline in investment. The US is one of the major sources of foreign investment for the Indian FMCG sector. The recession in the US is likely to lead to a decline in foreign investment in the Indian FMCG sector, which will result in a decline in the growth of the sector. The US recession is also likely to lead to a decline in consumer spending in India. As the US is a major market for Indian FMCG products, a decline in consumer spending in the US is likely to lead to a decline in demand for Indian which was lower than the double-digit growth observed for the five preceding quarters. Dabur India reported a 4% rise in volume, while Britannia Industries Ltd. recorded a 7% increase. Businesses have often underlined the decline in rural demand. Farm revenues have decreased. Consumer confidence is poor. The liquidity crisis is another issue that everyone is dealing with.

FMCG products in India. This will result in a decline in revenue for Indian FMCG companies and a decline in employment in the sector. As businesses raise prices across categories to account for rising input costs, consumption in India's fast-moving consumer goods (FMCG) sector is slowing down. Although price hikes helped the industry grow by 6% in the January–March quarter compared to the prior year, consumers' tightening of their purse strings caused sales volumes to decline by 4%, the most in the previous three quarters.

Due to their inability to pass on the higher input costs to customers, small manufacturers have also left the market in greater numbers (5.3%) as a result of the recession. Manufacturers' input costs are at an all-time high due to labour scarcity and rising gasoline prices Margin losses have been significant as a result, according to Radhey Shyam Dixit, CMD of Ananda Dairy. The price-sensitive rural markets that took the brunt of the greater price rises (11.9% in rural versus 8.8% in urban) were a major contributor to the overall decline in MCG volumes According to Nielsen NielsenIQ research, rural consumption decreased by more than 5% over the period as prices for items like packaged atta, vanaspati, and refined and unrefined edible oil increased by 15%.

According to Satish Pillai, MD, India, NielsenIQ, in continuation from last year, macroeconomic variables are still dictating purchase patterns for the Indian consumer, and they are experiencing the impact of the price increase, notably in the food and basics categories. However, the overall volume degrowth in non-food categories is much greater (-9.6% for nonfood, -1.8% for food). With a volume increase of 1.5% in the food sector, impulse purchases overcame the slowdown blues as customers flocked to smaller packages of salty snacks, chocolates, and confectionery. According to Sanket Ray, president of Coca-Cola operations in India and Southwest Asia, more Indian homes are choosing multipacks to handle rising consumption occasions rather than the massive single units that were previously the standard. Modern trade, one of the major sales channels displayed signs of stabilization with volume growth of 5.3%, while traditional trade experienced volume degrowth of -4.9%, driven by a move toward smaller packs. E-commerce saw 5.6% growth as well.

Given these elements, it is evident that a rise in demand is not anticipated to occur rapidly. The US recession is also likely to lead to a decline in the value of the Indian rupee. The US dollar is a major currency used in international trade and a decline in the value of the US dollar will lead to a decline in the value of the Indian rupee This will make Indian FMCG products more expensive for foreign buyers, which will result in a decline in demand for Indian FMCG products. The Indian government has taken several measures to mitigate the impact of the US recession on the Indian FMCG sector The government has announced a package of measures to support the FMCG sector, including subsidies for exports, tax incentives for FMCG companies, and financial assistance for FMCG companies. These measures are likely to help the Indian FMCG sector weather the impact of the US recession.

Conclusion

Analysts at Kotak Institutional Equities noted on May 4 that when management like Hindustan Unilever uses the term recession in its remarks in the post-results presser, it often isn't a one-quarter hiccup Both GCPL and Dabur India Ltd 's management remarks lacked inspiration. These two businesses highlighted the demand-boosting necessity of additional fiscal stimulus. HUL's volume increase for the quarter ending in March was 7%,

The US 2022–2023 recession significantly impacts the Indian FMCG sector The decline in demand for Indian FMCG products in the US, the decline in investment, the decline in consumer spending, and the decline in the value of the Indian rupee are all likely to have a negative impact on the Indian FMCG sector. The Indian government has taken several measures to mitigate the impact of the US recession on the Indian FMCG sector, which is likely to help the sector weather the recession’s impact.