India FMCG sector seen growing 8%-10% in FY27 on price hikes: CRISIL Ratings

India's organised fast-moving consumer goods sector is expected to post slightly faster revenue growth this fiscal year, but rising crude-linked input costs and slowing demand growth will squeeze profitability, according to a report by rating agency CRISIL Ratings.

The sector is projected to grow revenue by 8%-10% in fiscal 2027, compared with about 8% growth in the previous fiscal year, driven largely by price increases rather than higher sales volumes, the agency said on Thursday.

The report said companies are likely to raise prices to offset higher costs of crude-linked inputs such as packaging materials, amid supply disruptions and elevated oil prices stemming from tensions in West Asia.

However, volume growth is expected to slow sharply to 2%-3% this fiscal year from 5%-6% a year earlier, as inflationary pressures hurt consumer spending in both urban and rural markets.

"Household budgets, both rural and urban, will face inflationary headwinds this fiscal as average crude oil prices for this fiscal are projected at 30–35% higher on-year," said Anuj Sethi, senior director at CRISIL Ratings.

The agency warned that rural demand, which had outperformed urban markets over the past two years, could weaken if India receives below-normal monsoon rainfall this year.

The report, based on a study of 74 FMCG companies accounting for about one-third of the sector's estimated ₹6.6 lakh crore revenue in fiscal 2026, said the food and beverages segment contributes nearly half of industry revenue, while personal care and home care account for about a quarter each.

Companies making soaps, detergents, shampoos and hair oils are expected to face steeper cost pressures because crude-linked inputs make up 30%-40% of their raw material costs, compared with around 15% for food and beverage makers.

CRISIL estimates operating margins for rated FMCG firms will decline by 150-200 basis points this fiscal year from around 19% last year, even as companies try to offset rising costs through selective price hikes, lower advertising spending and supply-chain efficiencies.

"Gross margins of organised FMCG players will decline 300-350 basis points due to the rise in input costs, as pass-through of cost inflation will be partial amid competitive pressures and the risk of downtrading," said Aditya Jhaver, director at CRISIL Ratings.

The agency, however, said credit profiles of FMCG companies would remain stable due to strong cash generation, low leverage and healthy liquidity.

The report said key risks to the sector include prolonged high crude oil prices, weak domestic consumption and uncertainty surrounding the monsoon season.