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  Business   In Other News  30 Mar 2019  Rural demand for FMCG shows slowdown signs in Q4

Rural demand for FMCG shows slowdown signs in Q4

THE ASIAN AGE. | SANGEETHA G
Published : Mar 30, 2019, 1:18 am IST
Updated : Mar 30, 2019, 1:18 am IST

With the aim to combat agrarian distress, the government had announced PM-KISAN scheme for the small and marginal farmers

Due to the protracted winter, wholesalers are not optimally stocking up winter products.
 Due to the protracted winter, wholesalers are not optimally stocking up winter products.

Chennai: Despite the government rolling out the PM-KISAN scheme for the distressed farm sector, rural demand for fast moving consumer goods, which was in a recovery path, is once again showing signs of slow down.

The volume growth of key FMCG companies for fourth quarter of the fiscal, as estimated by Edelweiss Securities, shows a slower growth. Bajaj Corp's quarterly growth seems to be slower at 5.5 per cent in Q4 FY19 compared to 7 per cent in Q3 FY19. Colgate is expected to be down from 7 per cent in Q3 to 5 per cent in Q4. Domestic volume growth of Dabur is likely to fall from 12.4 per cent to 4.5 per cent, Emami from three per cent to two per cent and Hindustan Unilever from 10 per cent to 6 per cent.

 

"After strong rural as well as urban growth over the past six-seven quarters, the consumption engine is again slowing down. Some of the reasons for this transitional slowdown are protracted winter, liquidity crisis at the wholesale level, delayed as well as limited payouts of PM-KISAN scheme and consumers hoarding more cash pre-election. These coupled with macroeconomic headwinds - slower GDP growth, rural wage growth and soft consumer price Index - is leading to higher unemployment,' said Abneesh Roy, Senior Vice President, Institutional Equities, Edelweiss Securities.

With the aim to combat agrarian distress, the government had announced PM-KISAN scheme for the small and marginal farmers. The first instalment totalling would be paid out by the end of March. However, reports suggest that only 47.4 million of the 120 million-odd small and marginal farmers were registered before the Model Code of Conduct (MCC) for general election came into effect. Further, so far only 27.4 million farmers have received the first instalment while others are caught somewhere within the four-stage validation process that was introduced belatedly to weed out fake beneficiaries. Some states would completely miss out on the first instalment, as they did not submit a list of beneficiaries to government. Thus, the actual cash ending up in the hands of beneficiaries has been limited.

 

Meanwhile, winter this time has been longer than usual and it is still cold up north. This has impacted consumption of summer products such as juices, talcum powder and other cooling products. Due to the protracted winter, wholesalers are not optimally stocking up winter products. On the other hand, due to the delayed summer, wholesalers are not piling up inventory of summer products. This has led to lesser off-take by wholesalers.

Though RBI's Open Market Operations purchases have improved the base level liquidity, households have been hoarding cash in the run-up to elections.

However, Edelweiss expects things to look up in the coming quarter. "While summer is delayed this year, it is likely to be 'above normal' and should aid recovery of summer products' sales. Weather forecasting agency Skymet's prediction of a normal monsoon in 2019 with a 50-60 per cent probability of El Nino is also comforting,' said Roy.

 

Tags: pm-kisan scheme, fmcg