Rural demand in India remains robust during the April-June period, according to NielsenIQ's positive outlook.
India's Fast-Moving Consumer Goods (FMCG) sector witnessed a significant surge in Q2 2025, with rural markets leading the charge. The sector experienced a 13.9% year-on-year growth, marking a notable increase from the previous quarter's 11% growth.
The main drivers of this robust rural growth are sustained strong rural demand, easing inflation, favourable monsoon conditions, government incentives such as income tax cuts, and increased consumption of smaller pack sizes.
Rural FMCG volume growth was nearly twice that of urban growth, with rural areas recording an 8.4% increase compared to urban areas' 4.6%. This trend marks the sixth consecutive quarter where rural areas have outpaced urban areas in volume growth.
Favourable monsoons boosted agricultural incomes, which in turn increased discretionary spending in villages and rural towns. Income tax cuts and government economic incentives also positively impacted consumer spending power in rural regions.
Consumers showed a preference for smaller pack sizes, enabling affordability and volume increase. This shift towards smaller pack sizes is evident, with unit growth outpacing volume growth.
Small manufacturers in rural markets have also contributed significantly by catering to local demand. These smaller players grew faster than large ones, helped by better rural economic conditions and pricing.
E-commerce growth, particularly in southern metros, is fueling FMCG distribution networks and consumer reach, indirectly supporting rural demand through improved supply chains. Urban areas, especially smaller towns, showed signs of recovery, although metro consumption declined due to channel shifts.
The home and personal care (HPC) segment experienced stronger volume growth than food categories, marking a shift in consumer behavior. The RBI attributes this economic activity to buoyant rural demand and increased fixed investment.
Sharang Pant, Head of FMCG Customer Success at NielsenIQ, stated that the outlook for Indian consumption remains highly optimistic due to easing inflation and a promising monsoon forecast. RBI Governor Sanjay Malhotra further emphasised that above-normal southwest monsoon, lower inflation, rising capacity utilisation, and favourable financial conditions continue to support India's domestic economic activity.
The FMCG industry in India experienced robust rural growth in Q2 2025, with rural and small town markets leading the surge. The RBI forecasts continued support for domestic economic activity. Small FMCG players are expanding rapidly, capturing market share from established brands. The trend towards smaller pack sizes is expected to continue, reflecting shifting consumer preferences.
Sports brands capitalized on this rural growth, expanding their presence in smaller towns and villages. The surge in rural demand led to an increased sale of sports equipment and apparel, contributing to the overall rural FMCG growth.
Consumers in rural areas, with improved discretionary spending and enhanced purchasing power, showed a growing interest in sports activities, further fueling the demand for sports goods.
