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FMCG Demand Surging in Rural India
Apr 21, 2009

Rural areas in India are pushing the demand for fast moving consumer goods on account of rising rural income and better penetration of FMCG companies in these areas.

According to a research commissioned by the Associated Chambers of Commerce and Industry in India, rural areas are propelling the demand for fast moving consumer goods (FMCG), passenger cars, two-wheelers and organized retail goods at comparatively faster pace than the urban areas, and thus, leading to a healthy increase in the revenue of companies despite the global recession, as reported by domain-b.com.

“The FMCG sector in rural areas is expected to grow by 40% against 25% in urban areas,” stated ASSOCHAM. But no time frame for these predictions is given by the Association. With current estimated value of over Rs 560,000 Crore, or nearly 40% of the total retail market valued at Rs 1,400,000 Crore, the rural retail market will remains the potential area for growth.

Increasing rural income, largely due to the growth in agricultural activities, coupled with better penetration by firms in the rural areas have led to the increase in demand for various key industries. Moreover, rising consumerism and better penetration of FMCG sector are boosting growth and rapid expansion of the FMCG sector in the rural India. According to the report, increasing liquidity in rural markets is due to the rise in production of agri-products and the subsidies granted to the farmers. 

Several FMCG firms, including ITC and DCM, have been registering faster and higher growth in the sales of their goods in the rural markets as compared to the urban markets. This has significantly added to their bottom lines. 

However, the rural retail market is estimated to become double in the coming 4-5 years, but only around 10,000 from 600,000 villages in India are presently having an access to the services of organized retail sector. Despite the aforementioned initiatives, the rural areas in India are still under crisis, especially due to declining food security and rising food inflation. 

According to a Research Analyst at RNCOS, “Increasing penetration of FMCG sector in rural areas is leading to the development of rural India over the last few years. However, to grow strongly and rapidly, the rural areas should effectively address the widespread and fundamental problems such as education and infrastructure.”

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