Union Budget 2026: FMCG sector seeks to ride consumption wave

Bengaluru: The Fast-Moving Consumer Goods (FMCG) sector is a reflection of economic health. Closely linked to consumption, it acts as a barometer of personal income levels and overall economic wellbeing. What is consumed follows what is earned, and a thriving FMCG industry reinforces this critical link.

The Union Budget 2025-26 provided a strong impetus to consumer spending, particularly benefiting the FMCG sector through income tax relief that boosted disposable incomes, along with sustained emphasis on rural development. As the presentation of the Union Budget 2026-27 nears, the sector, encouraged by last year’s measures, expects the momentum to continue, with sharper focus on strengthening infrastructure and supply-chains, improving farm productivity, and investing in technology to further stimulate consumption.

According to the Indian Brand Equity Foundation (IBEF), the FMCG industry is projected to maintain healthy growth, supported by rising disposable incomes, a young consumer base, increasing brand awareness, and favourable government policies. “Household FMCG spending rose 8% to Rs 17,792 crore by April 2025, and is expected to rise further by year-end, driven by staples as well as non-staples. India’s vast middle-class population, and its median age of just 27, are shaping consumption trends,” the IBEF notes, adding that rising aspirations and financial inclusion are fuelling demand.

The sector has also demonstrated resilience, with companies focusing on efficient supply-chain management, sharper consumer insights, and digital-first communication strategies.

According to NielsenIQ, India’s FMCG market grew 13.9% in value and 6% in volume in Q1FY26, led by rural demand, smaller pack sizes, and the expansion of ecommerce. With growth drivers in place, the industry continues to seek steady policy support.

“Reforms in GST and other taxation have played a positive role in supporting consumption patterns over the past year. Boosting consumption remains an important ask from the FMCG sector. While urban demand is showing signs of recovery, rural consumption, though resilient, requires continued policy support, especially in the face of monsoon risks and inflationary pressures,” says Akshali Shah, Executive Director, Parag Milk Foods.

“Ahead of Budget 2026, a continued focus on the dairy and agriculture sector, particularly on strengthening infrastructure, improving farm productivity, and expanding milk collection, can help the sector become more efficient and globally competitive,” she adds.

Echoing this view, Subir Ghosh, Managing Director of Annapurna Group, says, “As the Union Budget approaches, the FMCG and food processing sector looks forward to policy continuity that strengthens India’s consumption-driven growth while reinforcing the agricultural value-chain. With rising costs and evolving consumer expectations, the industry hopes the Budget will focus on easing operational pressures and enabling sustainable, long-term growth.”

Agro-based FMCG growth has a direct impact on farmer livelihoods and the rural economy. Investments in modern processing technology, organised supply-chains, and improved farm practices can reduce wastage, support farmers, and enhance the global competitiveness of Indian agro and dairy products.

“Government support to help farmers improve production acreage and enhance output per hectare would be especially impactful, particularly for agri-linked sectors such as coffee,” says Praveen Jaipuriar, CEO of CCL Products (India) Ltd. “Measures that strengthen farm productivity and resilience support farmer incomes and contribute to supply stability and long-term growth across the FMCG value chain.” He adds that greater focus on free trade agreements can help Indian manufacturers expand globally.

The health and personal care segment, valued at $28-31 billion, continues to be driven by urbanisation, rising disposable incomes, and awareness. “A rationalisation of GST on core FMCG products, especially health, hygiene and nutrition-led offerings, would ease inflationary pressures and improve affordability,” says Chirag Pan, CEO and MD of Pan Health.

Technology adoption is another key expectation. “As digital and AI-led capabilities become central to manufacturing efficiency and agile supply-chains, targeted tax incentives for technology adoption can accelerate productivity and long-term competitiveness,” says Dheeraj Arora, CEO and MD, Hygienic Research Institute Pvt Ltd.

Swagatika Das, CEO and Co-founder of Nat Habit, expects Budget 2026 to strengthen Indian brands rooted in local strengths. “Make in India should go beyond manufacturing to include Ayurveda-based products, responsible packaging, and stronger retail ecosystems.”

For food and beverage companies, the Budget is also an opportunity to level the playing field. “Targeted incentives for small and mid-sized beverage manufacturers and support for distribution infrastructure can help us scale deeper into smaller markets,” says Sathya Shankar, Managing Director of House of Bindu.

Indian bottlers remain optimistic. “With continued emphasis on industrial corridors, ease-of-doing-business reforms, GST rationalisation, and incentives for sustainable packaging, the beverage industry can drive India’s next phase of inclusive growth,” concludes Paritosh Ladhani, Joint Managing Director, SLMG Beverages.

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Highlights - FMCG & Budget 2026: Sector Priorities
Key Focus Areas
Boost Consumption – Policies to increase disposable incomes and sustain urban & rural demand.
Strengthen Rural & Agri Supply Chains – Investment in farm productivity, dairy infrastructure, and logistics.
GST & Affordability – Rationalisation of GST on core FMCG, health, and hygiene products.
Tech & Manufacturing Efficiency – Tax incentives for automation, AI, and digital manufacturing.
Support Local & Sustainable Brands – Eco-friendly packaging, domestic sourcing, and SME incentives.
Key Stats
13.9% - FMCG value growth in Q1FY26
6% - Volume growth, led by rural demand
$28-31 bn - Size of India’s health & personal care market
27 years - India’s median age shaping consumption