FMCG sector to recover fully from demonetisation effect in this fiscal: Vivek Gambhir

IANS, Business Standard, 28 December 2016

The fast-moving consumer goods (FMCG) sector is expected to fully recover from the hit taken post-demonetisation by the end of this fiscal, Godrej Consumer Products Limited (GCPL) MD Vivek Gambhir on Wednesday.

"We are pleasantly surprised by how things are recovering. Our expectation is that in 4-6 weeks the FMCG industy should get back to full normalcy. By end of fourth quarter there will be full recovery," Gambir said in an interview with BTVi.
"As lot of us saw that post the announcement of demonetisation, few weeks after November 8 were very bad. But pace of normalcy was positive in December. Things are trending in right direction," he added.

In December the company postponed spending, but intends to increase it in Q4 to back all its products, Gambhir said.
"The biggest slowdown has been in the rural sector. On back of good monsoon, there was hope of rural demand picking up, which got derailed due to demonetisation. But our hope is that it will soon pick up," he added.

As a positive effect of demonetisation, there is a move towards formal economy and organised national players, Gambir said.
"Regional players, who are not organised, will find it increasingly challenged. And with Goods and Services Tax (GST) it will become more difficult for them to evade indirect tax," he added.

Generally across the board, when consumers are constrained for cash, it affects the demand. "But pick-up in demand starts positive impact. Our hope is that we will see benefits sooner," Gambir said.

He said that though the modern trade has done well post-demonetisation but it cannot compensate for the wholesaler channel that thrives on cash.

South and west India have been more resilient, but impact is more on eastern India, that is wholesale-driven and driven by cash, he said.

"But for wholesale as well the expectation is that things should return to normal in 4-6 weeks. For us 40 per cent dependency is on the wholesalers," he added.

On GST, he said that though the April 1, 2017, deadline seems difficult at this stage, hopes are there that it will get passed by September 16 next year.