Rural consumer demand in stress, hopeful of recovery within a year: Harsh Mariwala

Low rural demand for FMCG products on the back of inflationary pressures has reflected in low volume growth for the industry, according to Marico’s Founder-Chairman Harsh Mariwala, who is hopeful of a recovery in six months to a year.   

“We have seen a lot of stress in rural areas and that reflected in very low volume growth rates for the FMCG industry. A lot will depend on how the rural economy shapes up in the next one year, and whether inflation will be contained,” he told Business Today on the sidelines of the Sharrp Summit 2023 organised by Rishabh Mariwala-led Sharrp Ventures on Wednesday in Mumbai.  

The urban side is relatively better, he said, adding that he sees it as a matter of time when rural demand will improve. “Hopefully, things will improve within 6 months to a year,” he said. 

The Saffola and Parachute maker had posted a 5.04 per cent increase in consolidated net profit at Rs 333 crore for its December quarter. Its revenue from operations was at Rs 2,470 crore, up 2.61 per cent. 

Higher retail inflation and a few states not getting enough rains meant that the FMCG sector witnessed low rural demand in the December quarter, analysts had pointed out. Rural demand is a key metric for FMCG companies as a significant part of India lives in rural areas.  

But latest CPI-based retail inflation figures released by the National Statistical Office (NSO) on Wednesday showed that the key metric had further cooled to a 16-month low of 5.66 per cent in March 2023. The figure was at 6.95 per cent in March 2022. 

This was the first month this year so far where India has seen a retail inflation falling below the 6 per cent set out by the Reserve Bank of India (RBI) as its upper tolerance limit. Data showed rural inflation stood at 5.51 per cent, while urban inflation was 5.89 per cent. 

The RBI has also hiked its repo rate by a total of 250 basis points so far since May 2022 to curb inflation. The central bank had projected average annual retail inflation of 6.5 per cent for the previous financial year, which ended on March 31, 2023.  

Analysts had also pegged that rural growth will see some recovery in FY24, helped by some moderation in inflationary trends, expectations of a good harvest, and continued government spending on rural infrastructure.