FMCG Operations Stabilise Following GST Reforms
The fast-moving consumer goods (FMCG) sector in India is witnessing a resurgence in operations, following the implementation of GST 2.0 which revised tax rates on many daily goods. Companies like Dabur, Emami, and Godrej Consumer Products report that production levels have normalised, indicating a positive shift in market dynamics as they gear up for anticipated demand in the coming quarters.
Months after the changes to the GST framework were introduced on September 22, the industry experienced significant disruptions as companies struggled to adapt. However, as supply chains and inventory levels stabilise, executives within the sector express optimism about upcoming sales growth, particularly in the January-March quarter.
Understanding the GST Impact
The GST 2.0 changes introduced lower tax rates on various consumer items, including soaps, shampoos, and food products. While aimed at fostering consumption, the transition period caused significant production slowdowns across the FMCG sector, which was initially unprepared for the swift adjustments required.
Many retailers responded by reducing orders to prevent excess capital blockage while they navigated the pricing changes. As a result, production was curtailed, leading to a backlog in stock replenishment. Now, companies report that they are back to operating at full capacity.
Industry Reactions
Mayank Shah, vice-president at Parle Products, highlighted that inventory levels have rebounded to normal as new packaging that reflects the revised prices begins to saturate the market. “We expect the full benefit of GST rationalisation on demand and sales will be visible from the January-March quarter,” Shah noted.
Mohan Goenka, vice chairman of Emami, echoed his confidence in the market’s recovery: “Stock levels have normalised, supply flows are smooth, and there are no disruptions to availability. Overall, operations are back to business as usual.” These sentiments reflect a broader consensus among FMCG executives about returning to pre-GST disruption performance levels.
Challenges During the Transition
During the GST transition, FMCG companies encountered a myriad of challenges related to old pricing and packaging. Tarun Arora, CEO of Zydus Wellness, indicated that old pricing presented issues with channel partners who were reluctant to accept products priced before the tax adjustments were made.
Additionally, confusion arose from products featuring both old and new prices on their packaging. “These issues are mostly streamlined now,” said Arora, reflecting the sector’s quick adaptations during this transitional phase.
Market Prospects Post-GST 2.0
As operations stabilise, major FMCG players now forecast a rebound in performance for the second half of the financial year. Dabur India’s sales head, Rehan Hasan, projected mid-to-high single-digit growth for the upcoming months, adding that demand in rural regions continues to surge ahead of urban counterparts.
Hasan mentioned that urban demand is increasingly favoured by modern trade and e-commerce channels, highlighting a shift in buying patterns that could further bolster growth in the FMCG sector.
Consumer Trends and Innovations
Moreover, companies are adjusting their marketing strategies and product offerings to align with these evolving consumer preferences. The push towards larger pack sizes at familiar price points is one approach being used to filter the benefits of the new GST structure to consumers directly.
Sudhir Sitapati, managing director of Godrej Consumer Products, expressed his bullish outlook on demand growth, stating that “the entire industry is mostly positive on the demand growth post GST 2.0.” He anticipates that strong demand will materialise within the coming weeks.
Supply Chain Adjustments and Future Expectations
With stability returning to supply chains, manufacturers like AWL Agri Business have indicated that demand for inputs has also returned to pre-transition levels. Angshu Mallick, executive deputy chairman of AWL, noted that consumption rates among food producers are once again on the rise, particularly in sectors like edible oils.
For sectors like consumer durables, the situation is similar. Air-conditioner manufacturers, who faced slumps earlier in the fiscal year due to weather conditions, are now optimising their inventories. B Thiagarajan, managing director of Blue Star, shared insights on inventory corrections and how they are adapting strategies following the GST rate reduction on air-conditioning units.
Conclusion: Navigating Future Challenges
The FMCG sector emerges from the GST transition phase renewed and ready to capitalise on expected consumption growth. As companies rebuild their stock and address past pricing challenges, the focus will shift to harnessing market opportunities, particularly in the context of emerging purchasing trends and consumer preferences.
While movements in the market remain fluid, the adjustments made by major firms and the stabilisation of supply chains propel a wave of optimism that is fueling expectations of significant growth in the near future. By the end of the first quarter of 2026, analysts anticipate this optimism to reflect positively in sales figures across the FMCG landscape.