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FMCG sector to recover fully from demonetization effect in this fiscal

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The fast-moving consumer goods (FMCG) sector is expected to fully recover from the hit taken post- by the end of this fiscal, MD, , said on Wednesday.

FMCG sector to recover fully from demonetization effect in this fiscal
As a positive effect of demonetization, there is a move towards formal economy and organised national players

“We are pleasantly surprised by how things are recovering. Our expectation is that in 4-6 weeks the FMCG industry should get back to full normalcy. By end of fourth quarter there will be full recovery,” Gambhir said in an interview with BTVi.

“As lot of us saw that post the announcement of demonetization, few weeks after November 8 were very bad. But pace of normalcy was positive in December. Things are trending in right direction,” he added.

In December the company postponed spending, but intends to increase it in Q4 to back all its products, Gambhir said.

“The biggest slowdown has been in the rural sector. On back of good monsoon, there was hope of rural demand picking up, which got derailed due to demonetization. But our hope is that it will soon pick up,” he added.

As a positive effect of demonetization, there is a move towards formal economy and organised national players, Gambhir said.

“Regional players, who are not organised, will find it increasingly challenged. And with Goods and Services Tax (GST) it will become more difficult for them to evade indirect tax,” he added.

Generally across the board, when consumers are constrained for cash, it affects the demand. “But pick-up in demand starts positive impact. Our hope is that we will see benefits sooner,” Gambhir said.

He said that though the modern trade has done well post-demonetization but it cannot compensate for the wholesaler channel that thrives on cash.

South and west India have been more resilient, but impact is more on eastern India, that is wholesale-driven and driven by cash, he said.

“But for wholesale as well the expectation is that things should return to normal in 4-6 weeks. For us 40 per cent dependency is on the wholesalers,” he added.

On GST, he said that though the April 1, 2017, deadline seems difficult at this stage, hopes are there that it will get passed by September 16 next year.