Sales of daily household necessities and grocery items recorded a strong rebound during the October-December quarter, signalling a revival in consumer demand after the GST rate was reduced on several essential products from September 22.
Industry data from the first full quarter following the GST rationalisation indicates that the government's objective of reviving consumption-after multiple quarters of inflation-led slowdown, has largely been achieved. According to executives citing NielsenIQ estimates and internal company data, FMCG volumes grew by 9-10% in the December quarter, compared with 7.1% growth in the same period last year.
The rise in volume reflects an increase in the number of products sold across categories such as soaps, detergents, snacks and noodles, despite temporary trade disruptions and inventory realignment at distribution channels.
Urban-Rural Demand Gap Narrows
Commenting on the trend, a senior executive at Parle Products said the post-GST reform quarter clearly shows improved volume growth and a narrowing of the urban-rural demand gap. "We expect the momentum to continue over the next two quarters, with a strong focus on premiumisation," he added. Parle manufactures popular brands such as Hide & Seek, Monaco and other snack and bakery products.
While volumes improved, value growth remained largely flat due to price reductions across categories following the tax cut. FMCG value growth stood at 10-11% in the December quarter, nearly unchanged from 10.6% recorded a year earlier.
Lower GST on Essentials Drives Consumption
Under the revamped GST structure, tax rates on daily essentials including soaps, shampoos, toothpaste and select food items-were reduced to 5% from earlier slabs of 12% and 18%. However, many companies witnessed temporary disruptions in the trade pipeline as distributors delayed purchases to avoid working capital blockage and complications around price difference credits.
Wipro Consumer Care and Lighting, which owns brands such as Santoor and Yardley, said the improvement in demand is the result of several cumulative factors. "Income tax benefits are still flowing through the system. Commodity prices, including crude oil, are cooling, and the monsoon has been favourable. All these factors together are clearly positive for consumption," the company's chief executive said.
Outlook Remains Positive for FMCG Sector
Urban demand had begun slowing from mid-last year due to rising prices of core commodities and fuel, forcing consumers to cut discretionary spending. At the same time, established FMCG players have been facing increased competition from regional and digital-first brands across categories.
Despite these challenges, industry leaders remain optimistic. The managing director of Godrej Consumer Products said the overall consumption outlook looks strong, supported by stable GDP growth and recent tax relief measures. "With both GST and income tax reductions, there is more money in consumers' hands, which should drive demand growth," he said.
Most listed FMCG companies have indicated that the second half of FY26 is likely to see volume-led growth as supply chains stabilise and pricing pressures ease.
Rural Markets Continue to Lead
NielsenIQ, in its July-September FMCG update, highlighted that rural markets have outperformed urban areas in volume growth for seven consecutive quarters. In the September quarter, rural volumes grew 7.7%, compared with 3.7% growth in cities. However, the gap has begun to narrow as urban demand shows signs of sequential recovery.
Overall, the GST rate cut on essential goods appears to have played a key role in reviving FMCG volumes, setting the stage for sustained consumption growth in the coming quarters.
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