Consumers Favor Big-Ticket Purchases, ETCFO
Nearly three months after the revised GST rates came into effect, the fast-moving consumer goods (FMCG) sector is still waiting to see the full impact of the tax cuts, as consumers initially channelled their spending towards big-ticket items such as cars and consumer durables rather than everyday staples, The Times of India reported.
According to the report, shoppers rushed to take advantage of sharper GST reductions on high-value products, where the savings were more visible, instead of increasing purchases of low-cost items like biscuits, soaps and shampoos. While there are early signs of a demand revival in FMCG, industry executives said it will take a few more quarters to clearly assess the extent of growth.
In several FMCG categories, companies have passed on part of the GST benefit through higher grammage in small packs rather than outright price cuts, muting the immediate impact on volumes. Industry leaders are also divided on how quickly lower tax rates will translate into stronger consumption, though the broader consensus is that GST reductions should eventually boost affordability and encourage consumers to trade up to branded and premium products.
“FMCG growth in the last four to five years has been puzzling. With GDP growing at 7–8%, one would expect FMCG volumes to grow faster, but they have been at 4–5%,” Sudhir Sitapati, MD and CEO of Godrej Consumer Products and chairman of the CII National Committee on FMCG, told TOI. He said the long-term impact of GST cuts would become clearer in the coming months, though short-term benefits were visible in categories where rates were lowered.
Marico MD and CEO Saugata Gupta said the immediate gains from GST cuts flowed to durables and automobiles, where rates dropped sharply from 28% to 18%. “For FMCG, the benefit will take time,” he said at the CII FMCG Summit on Monday.
The report added that weak urban demand, driven by high inflation over the past year, has continued to weigh on FMCG growth, particularly in low- to mid-income segments. Companies are now banking on a combination of GST cuts, income tax relief and easing inflation to revive demand.
Sudhanshu Vats, MD of Pidilite and co-chairman of the CII National Committee on FMCG, said GST cuts would have a multi-year impact, boosting category creation, premiumisation and market penetration over time.
With inputs from TOI
