India’s FMCG sector recorded a mild slowdown in Q2 FY26 as companies adjusted to revised GST rates, but analysts expect a sharp revival in the food and staples-driven segments in the second half of the year, according to a new update by Anand Rathi Research.
Nielsen data cited in the report shows overall FMCG value growth easing to 12.9% in Q2 FY26 from 13.9% in Q1, while volume growth moderated to 5.4% from 6%. Despite the dip, rural markets continued to power ahead—growing at 7.7%, nearly double the 3.7% expansion in urban India. This marks the seventh consecutive quarter where rural consumption outpaced urban demand.
The impact of GST rate revisions led to temporary disruptions across the food industry, including pipeline corrections and destocking. Companies reported revenue hits in the range of 1% to 4.5% during the transition period. However, trade began normalizing by mid-October.
Industry leaders believe the GST cuts will act as a significant consumption trigger, especially in food, staples, beverages, and daily-use categories, by improving affordability at the mass market level. A favourable monsoon, firmer rural sentiment, and a low base from last year’s H2 are expected to further support recovery.
Cost pressures also appear to be easing. Key raw materials such as palm oil, wheat, crude oil, HDPE, and polypropylene have declined 10–18% year-on-year. This deflation, paired with earlier price hikes and cost rationalisation, is likely to lift gross and EBITDA margins for food-led FMCG companies in the coming quarters—though Q2 margins remained soft for several players.
Management commentary reflects cautious optimism.
HUL expects a demand pickup from November, aided by GST-led increases in disposable income and moderating food inflation.
Dabur reported a strong rural revival and anticipates mid- to high-single-digit growth in H2.
Tata Consumer sees continued momentum across tea, salt, and its fast-growing e-commerce business.
Britannia expects stable margins aided by benign commodity trends and improving rural offtake.
Overall, with food inflation cooling, raw material costs easing, and consumers benefiting from GST adjustments, the food-driven FMCG sector is poised for a stronger, more broad-based recovery in the latter half of FY26.