India’s consumer packaged goods and retail sectors may not be able to sustain the high growth path solely on consumption-led demand in the wake of structural bottlenecks, said a report prepared by FICCI and advisory firm KPMG released recently.
The report notes that the sectors may already be decelerating.
In fiscal 2015, the overall consumer goods market growth slowed down to 7.5% from 10.6% in the previous fiscal year. The decline in growth was recorded in food, personal care, home care and over-the-counter goods across India, said the report ‘Sell Smart, Moving Towards a Smarter Consumer Market’.
The report states that consumer packaged goods and retail sectors have been unable to take full advantage of the country’s potential due to the structural issues in these sectors.
The key issues hovering on these sectors include the paucity of proper infrastructure and a complex policy and regulatory framework in the country, besides counterfeits and pass-offs, said the report.
The Indian consumer packaged goods sector was valued at Rs.3.2 trillion in 2014 and is projected to register a compounded annual growth rate of about 11.5% to Rs.6.1 trillion in 2019.
However, it is possible for the consumer packaged goods sector to see higher growth and add Rs.2.1 trillion beyond the consumption-driven growth projection, if the companies follow a ‘SMART’ growth policy, said the report while laying out a “smart growth strategy”. SMART stands for following practices of sustainable growth, make in India, making sure of the authenticity of products, being a responsible business and using technology and innovation for growth.
The Indian retail sector is projected to touch Rs.70 trillion by 2020 from Rs.40 trillion in 2014. However, SMART-driven growth could translate to an additional Rs.9.4 trillion growth for the sector in this period, the report added.
Meanwhile, penetration of modern retail is expected to reach 18% from the current 9.8% in this period, driven by the increasing appeal of modern retail among shoppers as well as change in shopper expectations and behaviour.