The Confluence of Reforms Fueling FMCG Growth

by Nidhi Agrawal

Sep 18, 2025 | 04 min read

The FMCG sector has not had the best of times in the past 2-3 years. HUL saw volume growth in the range of 2-4%. Nestle’s growth hasn’t been great either. But this year, we expect things to change.

As per CRISIL, the FMCG sector will see a revenue growth of 6-8% in this financial year (FY 25-26), driven by both higher volumes and price gains.

While GST reforms dominate the headlines for directing consumer spend, two other factors are likely to play an equally important role in fuelling this growth: revised tax slabs and the repo rate cut.

More money in the hands of tax payers

The government has revised tax slabs in the new tax regime. Below are the top benefits for income taxpayers:

No income tax for those with income less than or equal to 12.75 lakhs
Savings for those with income in the range of 15 lakhs to 24 lakhs

In FY 2023-24, 70%+ taxpayers opted for the new tax regime. With reduction in tax rates in the next financial year, more taxpayers are expected to opt for the new tax regime. A middle income taxpayer may save anywhere between 0.5 to 1 lakh in taxes.

This is significant and leaves more disposable income in the hands of taxpayers.

Will they save? Or will they spend more? The situation points towards the latter.

Saving doesn’t make sense any more

On 6th June, Reserve Bank of India (RBI) cut repo rates by 50 bps (100 basis points = 1%). It has already cut repo rates by 25 bps twice (once in February and another time in April). The total repo rate cut this calendar year is 100 bps or 1%.

Repo rate is the rate at which RBI lends to the commercial banks. If repo rates are cut then your loans become cheaper. Also, the money in savings accounts and in fixed deposit accounts earns less.

When saving doesn’t feel rewarding, people naturally turn to spending on life’s little joys. GST 2.0 adds to this mood by making it seem like happiness now comes at a lower price.

The GST 2.0 advantage for consumers

India’s GST 2.0, approved in September 2025, cuts down the old four-tier system to two main rates: 5% for essentials and 18% for most goods, with a new 40% rate for luxury and sin products.

This means the 12% and 28% slabs have been abolished and many goods formerly at 12% or 18% move to 5%, while items like aerated drinks, tobacco, pan masala and high-end cars now face 40% GST.

The intent is clearly pro-consumer. By cutting taxes on daily-use FMCG and CPG items, the government aims to ease household budgets, increase rural and urban demand, and stimulate consumption-led growth.

In economics, there is a concept of price elasticity of demand. If the price of a product falls, then its demand increases. If a product has price elasticity as 1 and if its price falls by 10% then its demand will increase by 10%. The price cuts will definitely lead to an increase in demand.

However, in reality, FMCG brands are passing on GST cut benefits through price drops or higher grammage, depending on pack size and alignment with magic price points.

For instance, HUL’s recent ads show a 340ml Dove shampoo reduced from ₹490 to ₹435, and a 4×75g Lifebuoy soap pack from ₹68 to ₹60.

On the other hand, Cremica’s Akshay Bector expects the small‑pack sizes that were trimmed for inflation will be restored. “The relevant grammage which had to be taken off will come back,” he notes.

Similarly, At Bikaji Foods, COO Manoj Verma says even a 5 to 10% extra pack weight can be squeezed into namkeen packets without altering the price.

Bringing it all together

Revised tax slabs and lower repo rates are expected to leave consumers with an additional ₹1-5 lakh in disposable income. At the same time, GST 2.0 has cut product prices by 5-10%. The tide has finally turned in favour of the FMCG sector, opening up significant opportunities for growth. After years of muted volumes and margin pressure, the industry now stands on the brink of a consumption revival.

For leadership, the strategic imperatives are clear:

Capacity planning: 6-8% revenue growth is projected for the sector, signalling the need for stronger supply chains to manage higher demand without affecting service levels.
Portfolio optimisation: Brands are likely to revisit pack sizes and grammage strategies to leverage GST cuts while staying aligned with magic price points.
Rural focus: While tax benefits directly aid middle-income urban consumers, the multiplier effect along with increased rural spending is expected to create growth opportunities across regions.

We have learned that this is more than just a rebound. It’s a once-in-a-decade chance to reset the growth curve. Companies that act boldly with sharper pricing, stronger distribution, and focused marketing will not just ride the wave but shape the FMCG sector’s next era of expansion.

At Bizom, we enable this transformation with Real Intelligence. On-ground insights that power smarter sales and distribution decisions. From optimising routes to maximising outlet coverage and ensuring claim accuracy, our platform helps brands turn market shifts into measurable growth.

Now is the time to harness Real Intelligence and stay ahead in India’s most promising consumption cycle.