FMCG major ITC expects consumption expenditure to pick up progressively led by continued recovery in rural demand backed by a good monsoon. The Kolkata-headquartered conglomerate also expects improvement in urban demand as inflation stabilises and tax cuts announced in the Union Budget boost disposable incomes.
ITC's outlook reflects persistent weakness in urban consumption, a growing concern for major FMCG firms that have faced sluggish growth for several quarters.
“The cumulative impact of pick-up in cape in the second half of FY 2024-25 and front loading of Government capex outlay in FY 2025-26, along with interest rate cuts and liquidity support from RBI, would also be supportive of growth…While higher capital expenditure outlays and focus on infrastructure are expected to drive growth and competitiveness of domestic manufacturing, focus on agri-related schemes is expected to boost farmers’ welfare and rural consumption demand, spurring a virtuous consumption-investment-employment cycle,” said ITC its latest annual report.
It noted that India's macroeconomic variables are expected to remain stable in FY26, with GDP growth staying around 6.5%.
ITC also raised concerns over food inflation, which witnessed a 'sharp uptick' and impacted the consumption growth in the FMCG sector, which is the second largest business of ITC after cigarettes.
"The impact of inflationary pressures on household savings weighed on consumption expenditure, particularly in urban markets; however, demand in rural markets was relatively resilient. The weakness in consumption was reflected, inter alia, in the muted volume growth of the FMCG sector," it said. Food inflation was 7.3% in FY25, while headline inflation (CPI) remained within the RBI's target range at 4.6%
ITC said consumer spending on the company's FMCG products has increased 4.6% to nearly Rs 34,000 crore in FY25, and the firm has expanded its play with 100 new products in the segment.