The Great Indian Consumption Shift: How Budget 2025 and Economic Trends Are Reshaping FMCG
by Archit Pathak
Feb 06 2025 | 04 min read
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Something is shifting in the way India buys and consumes. The Union Budget 2025 and the Economic Survey paint a picture of an economy where people have more money in hand, brands are becoming household names in smaller towns, and the kirana store remains the king.
Let’s break it down.
More Money, Bigger Spends
The biggest takeaway from this year’s budget? People will have more to spend.
Tax cuts mean that middle-income households will save anywhere between ₹30,000 to ₹1,10,000 annually, while rural incomes will get a boost from direct benefit transfers and agri-credit expansion.
People are already spending differently. HCES data shows that rural consumers are shifting from loose to branded goods.
What’s growing fastest? Packaged foods, dairy, and personal care. The essentials are still dominant, but the shift is clear—people want better, not just cheaper.
The Kirana Store is Still Where India Shops
Despite the rise of supermarkets and modern retail, kirana stores remain the backbone of India’s FMCG distribution—especially in rural areas.
For most Indians, kirana stores mean trust, convenience, and even informal credit—something that modern retail can’t easily replace.
And now, they’re becoming smarter. The government’s ₹1.5 lakh crore credit push for MSMEs means small retailers will have better access to financing, helping them stock up and expand their range of products.
A Boost for Pulses Production
India is the largest consumer of pulses in the world, but fluctuations in supply and pricing have been a persistent challenge. To tackle this, the government has launched a six-year mission, ‘Mission for Aatmanirbharta in Pulses’ to enhance pulses production for tur, urad and masoor, with a focus on:
- Climate-resilient seeds to improve yield.
- Higher protein content varieties to meet nutrition needs.
- Post-harvest processing improvements to reduce waste and ensure quality.
- Price stability mechanisms to protect both farmers and consumers.
This plan is expected to increase domestic pulses production, reduce dependence on imports, and bring stability to one of India’s most essential food categories.
For brands in packaged foods, ready-to-eat meals, and protein-based snacks, this initiative could mean a more stable supply chain and cost efficiencies.
A Make-in-India Push for Leather & Footwear
The leather industry, a major employment generator in India, is getting a policy push to enhance productivity and exports.
- A dedicated focus product scheme will help improve design capacity, component manufacturing, and machinery upgrades for leather and non-leather footwear.
- The initiative aims to generate employment for 22 lakh people, with a ₹4 lakh crore turnover target and ₹1.1 lakh crore in exports.
The ONDC Odyssey
The Open Network for Digital Commerce (ONDC) is revolutionising general trade by bringing small retailers online, allowing kirana stores to compete with modern retail and e-commerce giants.
- Increase in Transactions
The ONDC has reported a substantial increase in transactions. The CEO, T. Koshy said at the MSME Growth Summit that ONDC is expecting to reach 30 to 40 million monthly transactions by March 2025, up from around 10 million transactions in June 2024 and over 7 million in March 2024. This indicates a strong year-on-year growth trajectory.
- Onboarding of Small Retailers
The ONDC has successfully onboarded approximately 5-6 lakh merchants, with a significant portion being small retailers. Reports indicate that around 85% of these sellers are categorised as small sellers, highlighting the platform’s focus on empowering smaller businesses.
- Contribution of FMCG to ONDC Orders
Made in India, Sold to India
There’s another shift happening behind the scenes—more of what we buy is now made within the country.
MSMEs are responsible for over 36% of India’s total manufacturing output, and with new incentives for food processing and local production, supply chains are becoming more domestic.
How FMCG Brands Can Leverage These Shifts
With 90% of rural FMCG sales and 60% of urban FMCG sales still coming from kirana stores, brands must deepen engagement with small retailers.
Consumers are upgrading from loose to branded goods, especially in packaged foods, dairy, and personal care. FMCG brands should Invest in premiumisation with affordability—aspirational consumers seek better quality but at accessible prices.
With rural MPCE (Monthly Per Capita Consumption Expenditure) rising 9.2% YoY, rural India is becoming a key consumption driver. It will be key to develop hyperlocal distribution hubs for deeper last-mile penetration.
India’s consumer economy is shifting—from mass-market affordability to value-driven, quality-focused consumption. The kirana store remains central, but ONDC, local manufacturing, and digital integration are redefining the landscape. The brands that adapt quickly, optimise their distribution, and innovate for evolving consumer needs will emerge as the market leaders in this next phase of FMCG growth.
