India's consumer demand remains resilient despite the Iran war and inflation pressures, according to top company executives in the FMCG sector. This resilience is attributed to the country's strong consumption fundamentals, particularly in everyday essentials and luxury items like beauty and personal care products. However, the industry is cautious about the near-term future due to rising costs and potential supply chain disruptions.
The Iran war, which began in February 2026, has caused significant inflationary pressures in India, especially in the energy sector. This has led to increased costs for packaging, freight, and raw materials, impacting the profitability of FMCG firms. Despite this, most companies have managed to maintain their prices and even increase them by 3-8% to offset rising fuel and commodity costs.
One of the key reasons for the resilience in consumer demand is the strong growth in the dairy industry. India's dairy products, such as cheese, yogurt, and ice cream, are experiencing double-digit growth, according to Meenesh Shah, chairman at Mother Dairy and National Dairy Development Board (NDDB). This growth is expected to continue, even in the face of sustained inflation pressure, as the country's middle class continues to expand.
However, the industry is not without its concerns. Falguni Nayar, managing director at FSN E-Commerce Ventures, warns that the consumption of small luxuries, such as beauty and fashion products, is not as impacted during tougher times. This could potentially lead to a slowdown in demand for these products if the economic situation worsens.
The organized FMCG sector is expected to report slightly faster revenue growth this fiscal year, but rising crude-linked input costs and slowing demand growth will likely squeeze profitability, according to Crisil, a ratings agency. The sector's revenue growth is projected to be 8-10% in FY27, compared to 8% last fiscal, on the back of price increases. However, prolonged high oil prices, weak domestic consumption, and uncertainty surrounding the monsoon season are considered key risks to the sector.
Despite these challenges, the industry remains optimistic about the long-term fundamentals of India's consumption story. Tarun Arora, CEO at Zydus Wellness, believes that the underlying demand outlook remains strong, and the company is managing volatility through supply-chain efficiencies, productivity initiatives, and calibrated pricing strategies.
In conclusion, India's consumer demand is showing resilience despite the Iran war and inflation pressures, but the industry is cautious about the near-term future. The long-term fundamentals of the country's consumption story remain strong, and the industry is confident in its ability to manage the challenges posed by rising costs and supply chain disruptions.
