New Delhi [India] November 27 : India's fast-moving consumer goods (FMCG) sector witnessed a brief moderation in growth during Q2 of financial year 2026 (FY26) due to the impact of revised GST rates, but industry players remain upbeat about a strong revival in the second half of the fiscal, according to a latest sector update by Anand Rathi Research.
As per Nielsen data cited in the report, FMCG value growth eased to 12.9 per cent year-on-year in Q2 FY26 from 13.9 per cent in Q1, while volume growth softened to 5.4 per cent from 6 per cent. But, despite the slowdown, rural demand continued to outperform, expanding 7.7 per cent, nearly double the 3.7 per cent urban growth, marking the seventh straight quarter of rural outperformance.
The report notes that the transition to the new GST rates led to temporary disruptions, including pipeline corrections and destocking across categories.
According to the report, companies across the FMCG spectrum reported revenue impacts from the GST transition, ranging from 1 per cent to 4-4.5 per cent.
By mid-October, trade normalisation began to set in. Industry players expect the GST rate cuts to serve as a major consumption catalyst, especially in food, staples and personal care segments, by improving affordability.
A favourable monsoon, improving rural sentiment and a low base from H2 FY25 are also expected to support demand recovery.
The report highlights a deflationary trend in key raw materials, including polypropylene, palm oil, crude oil, wheat and HDPE, each declining 10-18 per cent year-on-year. This, combined with cost-control measures and earlier pricing actions, is likely to boost gross and EBITDA margins for most FMCG companies in H2 FY26.
However, Q2 FY26 margins remained under pressure for several players.
The report compiles management commentary from leading FMCG companies. HUL expects demand recovery from November, supported by GST-led gains in disposable income and easing food inflation. Dabur witnessed a strong rural recovery and expects mid- to high-single-digit growth in H2.
Godrej Consumer Products anticipates a sharp rebound in soaps and improved margins from palm oil correction. Marico foresees double-digit EBITDA growth in H2, backed by strong rural traction and premiumisation. Tata Consumer expects continued momentum in tea, salt and e-commerce channels, while Britannia sees stable margins ahead with benign commodity prices and better rural demand.
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