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<ul><li>After an unprecedented decline of -19% in the Jan-Mar quarter, FMCG industry displayed signs of recovery in Q3’20 with a 1.6% growth (versus Q3 ‘19).</li><li>FMCG witnessed a double digit growth of 10.6% in Q3’20 in Rural India, while the bigger cities (&gt;1 Lakh population including metros and Town Class 1) played catch-up. </li></ul>Nielsen India’s latest report gives us an insight into the consumers’ brains, <keyword id="34529" type="ORGANIZATION" weightage="20" keywordseo="fmcg-sector">FMCG sector</keyword>’s performance and how different parts of our countries are dealing with the current situation. With the pandemic achieving stability and markets and economy opening up, green shoots were visible in the July-August-September quarter for the year. There was an appreciable improvement in the performance of manufacturing, witnessed with an arrest of the declining Index of Industrial Production (IIP) from -57.3% in April’20 to +0.2% in Sep’20. Drop in unemployment rate from 23.7% at its peak in April’20 to 6.7% in Sep’20. Some of the macro variables still reflect the overall economic scenario with inflation rate continuing to rise and the Consumer Confidence Index (RBI) dropping to a low 49.9 in Sep’20 from a 85.6 in March’20 The above-mentioned positivity was reflected in the FMCG industry too. After an unprecedented decline of -19% in the Jan-Mar quarter, FMCG industry displayed signs of recovery in Q3’20 with a 1.6% growth (versus Q3 ‘19). Using proprietary Nielsen Retail Audit data, this note will further delve into the trends of Q3’20 and the outlook for 2020: FMCG INDUSTRY MOVES INTO A POSITIVE GROWTH SPACE The FMCG slowdown in Q2’20 saw a value decline of 19% as compared to the same period of 2019. This was fueled by massive disruptions in the production and supply chain, and low consumer confidence. The unlock from Q3’20, saw a revival in the industry with a growth of 1.6% versus a year ago. The revival was aided by businesses opening up with the pandemic reaching stable levels. Markets started opening up in a phase-wise manner and store closures came down to an average of 3 days a month in Q3’20 from an average of 9 days a month in Q2’20. After being cooped at home for a long time, consumers also started looking at resuming normal consumption levels. RURAL CONTINUES TO DRIVE GROWTH With easing of pandemic and markets unlocking in various phases in the third quarter of the year, we saw recovery across town classes with the rural and Rest of Urban (ROU) regions continuing to lead growth. FMCG witnessed a double digit growth of 10.6% in Q3’20 in Rural India, while the bigger cities (&gt;1 Lakh population including metros and Town Class 1) played catch-up. The rural markets have bounced back handsomely on the back of support provided by the government as well as good agriculture, reverse migration and a lower unemployment rate. Various favorable macro-environment factors have helped drive rural revival in Q3’20 <ol><li>Government dialing up on rural stimulus in the form of increased MGNREGA allocation- <ol><li>11% increase in average wages at an All India level (Sep vs Mar’20).</li><li>83L new households joined MGNREGA labour force </li></ol></li><li>'Garib Kalyan Rojgar Abhiyan’, support to agriculture and upskilling programs for migrant workers that returned to their villages.</li><li>A bountiful <a href="https://www.livemint.com/topic/indian-monsoon">monsoon </a>also brought cheer to farmers with a record output in the kharif crop season. </li></ol> HEALTH &amp; HYGIENE DOMINATES THE NEW LAUNCHES There have been a higher number of new launches per se during the Covid period and a higher number in the non-foods space. As Covid has prompted consumers to re-frame their habits into health and hygiene, more new launches have been made in the health &amp; hygiene basket including categories like hand sanitisers, floor cleaners, toilet cleaners, antiseptic liquids. New launches in the health &amp; hygiene space contributed to 37% (in value) of all new launches in the COVID period. The value contribution of new launches in the health &amp; hygiene category was higher during Covid period at 2.9% OUTLOOK 2020 (Including Traditional Trade, Modern Trade and E-Commerce) After the FMCG industry had a double digit drop in Q2’20 due to intense lockdown stressing the overall economy, it bounced back to positive +1.6% growth in Q3’20 which reflects the onset of green shoots. While the market has initiated a recovery, the demand and supply disruptions caused by the world’s severest lockdown from end-March have severely curtailed economic activity. It is gradually returning to normal as restrictions are relaxed. However, continued spread of the pandemic is keeping the economy watchful. Given the significant headwind built in the start of COVID-19 pandemic in March’20, <keyword id="10336754" type="UNKNOWN" weightage="20" keywordseo="Nielsen-forecast">Nielsen forecast</keyword> for 2020 to remain in the negative single digit (-3% to -1%). The key factors influencing the growth trajectory so far and the forecast for the future include: COVID-19 Impact On The Economy: Annual consumer price inflation in India increased to 7.5 percent in September of 2020 It is the highest rate since May 2014. Food inflation went up to 11.07 percent from 10.68 percent, the highest since January and ahead of the festival season impacting the overall expenditure and consumer confidence muted. The trajectory of the FMCG industry once again reinforces the inherent strength of the consumption story in India irrespective of the fact that we had a GDP which shrank 23.9% year-on-year in the second quarter of 2020. There are steps being actioned by the Government that can help counter these changes in the coming quarter in the farm sector and has sought to deliver labour market flexibility: <ul><li>The Interest-On-Interest waiver is expected to bring some relief and additional cash in hand for individuals and MSME businesses</li><li>The cash voucher scheme for central government employees is expected to boost spending in big proportions in upcoming months</li><li>About 83 lakh households enrolling from April to August under MNREGA saw an all time high providing livelihood in Rural</li></ul>A bountiful monsoon has brought cheer to farmers, with a record output expected in the kharif crop season. With reservoirs filled to the brim, output is expected to be high in the rabi season as well. Increasing purchasing power in the hands of farmers is expected to increase rural demand. There has also been an appreciable improvement in the performance of both manufacturing and service sectors in October. FMCG Q3’20- TO SUM UP <ul><li>AFTER A DISMAL PERFORMANCE IN Q2 (AMJ’20), FMCG INDUSTRY MOVES INTO A POSITIVE GROWTH SPACE</li><li>BHARAT (SMALL TOWNS &amp; RURAL), NORTH ZONE &amp; SMALL MANUFACTURERS DRIVING GROWTH</li><li>CONSUMER PREFERENCE FOR AFFORDABLE OFFERINGS CONTINUE</li><li>INNOVATION (NEW PRODUCTS LAUNCHED) DOMINATED BY HEALTH &amp; HYGIENE CATEGORY</li><li>NIELSEN OUTLOOK FOR FMCG INDUSTRY GROWTH FOR 2020 REVISED TO THE RANGE OF -1 TO -3%</li></ul>

Nielsen predicts degrowth in the FMCG sector by 1 to 3% in Q3’20

New Delhi, May 22 () Finance Minister Nirmala Sitharaman on Friday held a review meeting with CEOs of public sector banks (PSBs) and asked them to implement the mega 'Aatmanirbhar' relief package to revive the COVID-hit economy. The meeting via video conferencing took place in the backdrop of the Rs 21 lakh crore stimulus package announcement and the Reserve Bank coming out with fresh measures, including interest rate cuts. The Union Cabinet headed by Prime Minister Narendra Modi on Wednesday gave its nod for many of the schemes announced as part of 'Aatmanirbhar Bharat Abhiyan' package to prop up the economy reeling under the COVID-19 crisis. "Finance Minister Smt.@nsitharaman chairing the review meeting, through VC, with the chief executives of PSBs today to review the readiness of banks in implementing 'Aatmanirbhar' relief package," the Finance Ministry said in a tweet. "To operationalise the announcements made by Hon'ble FM @nsitharaman ji under #AatmanirbharBharat, review meeting through VC was held with all PSBs. Everyone aligned on the need for quickly addressing the needs of MSMEs &amp; other customers. Operational details to be released soon," the Department of Financial Services, Ministry of Finance, said in a tweet. The finance minister has emphasised on the quick disbursal of additional loans to MSMEs, to simplify process, formats and documentation, Indian Bank managing director Padmaja Chunduru said after the meeting. Since the Union Cabinet has already given approval to various schemes announced under the package, operational guidelines have been issued to banks. The most important among them is the Emergency Credit Line Guarantee Scheme (ECLGS) worth Rs 3-lakh crore for MSMEs hit hard by the coronavirus crisis. The 100 per cent guarantee scheme at the concessional rate of 9.25 per cent was the second-biggest component of the Rs 20 lakh crore comprehensive package announced by Sitharaman last week. Currently, the rate of interest on loans given by banks to the MSME sector varies from Rs 9.5 per cent to 17 per cent, depending on the risk perception. The MSME sector is considered as the backbone of country's economy as the sector contributes over 28 per cent of the GDP and more than 40 per cent of exports, while creating employment for about 11 crore people, second highest after agriculture. The scheme is expected to benefit 45 lakh MSME units. Other scheme to help the stressed MSME sector also included Rs 20,000 crore subordinate debt for stressed or loan defaulting MSMEs, which could benefit 2 lakh such businesses. A fund of funds for MSME is also being created, which will infuse Rs 50,000 crore equity in MSMEs with growth potential. After the meeting, Central Bank of India managing director and CEO Pallav Mohapatra said the finance minister took stock of the situation and reviewed the progress of various schemes. "All the banks are very-very optimistic about the schemes that have been announced in the recent past by the government to support the economy. State-run banks sanction in the COVID-19 period is more than the corresponding period last year, which was a normal year," he said. "Loans worth over Rs 6.68 lakh crore were sanctioned by PSBs during March 1 - May 19 for 59.79 lakh accounts from MSME, Retail, Agriculture &amp; Corporate sectors. A steady increase in credit availability for each of these vital sectors" the finance ministry had tweeted earlier in the day. "Public Sector Banks sanctioned over Rs 1.07 lakh crore as emergency credit lines &amp; working capital enhancements in the period March 20 to May 19, with Rs 25,527 crore of this amount already being availed by customers," it said. Later, in an interview with DD News, the finance minister said the meeting with the public sector banks was "very good". She commended the work done by the public sector banks for the implementation of the Rs 1.70 lakh crore PM Garib Kalyan Yojana, which was an announcement made within two days after the lockdown was announced. "I must give credit to the public sector banks for having done a splendid job in implementing PM Garib Kalyan Yojana. So now with that same spirit this (Rs 20 lakh crore) package we have come up with, a partial guarantee, full guarantee for all enterprises... which banks will have to do. I was very reassured that the banks spoke in a very positive way," she said. On the credit guarantee scheme, Mohapatra said the government's commitment is for the entire Rs 3 lakh crore. "The commitment on the government under this Rs 3 lakh crore collateral free loans is 100 per cent." During deliberations, Indian Bank's Chunduru said, "Banks decided to focus also on Tier Ii and Tier III towns in all states to ensure needy MSMEs get the succour. CEOs of PSBs welcomed the Rs 3 lakh crore fully guaranteed loan component to MSMEs and assured the FM that all eligible units will get these loans promptly." Central Bank's Mohapatra said, "Risk aversion, to a great extent, has gone. No actions are being taken for any commercial decision going wrong because of other reasons." The meeting also took stock of interest rate transmission to borrowers by banks and progress on moratorium on loan repayments. The RBI has increased the moratorium on loan repayment by another three months till August 2020 to provide relief to borrowers whose income has been hit due to the crisis. DP MKJ

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Nielsen predicts degrowth in the FMCG sector by 1 to 3% in Q3’20

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FM meets PSU bank chiefs, prods them to implement 'Aatmanirbhar' relief package

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