FMCG Sector Products which have a quick turnover, and relatively low cost are known as Fast Moving

Consumer Goods (FMCG) or as consumer packaged goods. FMCG products are those that get replaced within a year. The product range generally includes a wide range of consumer products that need to be purchased at regular intervals such as toilet soaps, detergents, shampoos, toothpaste, shaving products, shoe polish, packaged foodstuff, and household accessories and other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. Indian FMCG sector is the 4th largest in the economy with a size in excess of INR 1300 billion (in FY2010) which accounts for 2.2 per cent of the GDP of the country and generates 5% of total factory employment in the country and is creating employment for three million people, especially in small towns and rural India. Given the essential nature of the products, the sector is largely immune to recessionary pressures. The sector grew by 11% annually in the last decade. Robust GDP growth, opening up of rural markets, increased income in rural areas, growing urbanization along with evolving consumer lifestyles and buying behaviours have all been drivers of this growth. This has also been facilitated by the many changes in the Indian economic and industrial landscapereduced levels of taxation, easier import of materials and technology, reduced barriers to entry of foreign players, growing organizational maturity of Indian players, growth of media, and, of course, the growing affluence and appetite for consumption of the Indian consumer. Governmental Policy Indian Government has enacted policies aimed at attaining international competitiveness through lifting of the quantitative restrictions, reducing excise duties, automatic foreign investment and food laws resulting in an environment that fosters growth. 100 per cent export oriented units can be set up by government approval and use of foreign brand names is now freely permitted. In the Budget FY2011 following steps were taken: - Full Central Excise duty exemption for air conditioning equipment & panels of 3 Tonne air-conditioning capacity and above, and refrigeration panels required for the installation of a cold storage, cold room or refrigerated vehicle for the preservation, storage, transport or processing of agricultural, apiary, horticultural, dairy, poultry, aquatic & marine produce. - Reduction of basic customs duty on Crude Palm Stearin imported for the manufacture of laundry soap, from 20% to nil. FDI Policy Automatic investment approval (including foreign technology agreements within specified norms), up to 100 per cent foreign equity or 100 per cent for NRI and Overseas Corporate Bodies(OCBs) investment, is allowed for most of the food processing sector except malted food, alcoholic beverages and those reserved for small scale industries (SSI). 24 per cent foreign equity is permitted in the small-scale sector. Temporary approvals for imports for test

marketing can also be obtained from the Director General of Foreign Trade. The evolution of a more liberal FDI policy environment in India is clearly supported by the successful operation of some of the global majors like PepsiCo in India. Removal of Quantitative Restrictions and Reservation Policy The Indian government has abolished licensing for almost all food and agroprocessing industries except for some items like alcohol, cane sugar, hydrogenated animal fats and oils etc., and items reserved for the exclusive manufacture in the small scale industry (SSI) sector. Quantitative Restrictions were removed in 2001 and Union Budget 2004-05 further identified 85 items that would be taken out of the reserved list. This has resulted in a boom in the FMCG market through market expansion and greater product opportunities. Major Players of the Sector: Colgate-Palmolive Ltd Dabur India Godfrey Phillips Godrej Consumer Products Limited Hindustan Unilever Ltd. ITC Johnson & Johnson Marico Industries Ltd. Nirma Limited Procter & Gamble References: 1. http://www.ciionline.org 2. http://www.equitymaster.com/budget2011/sectors/fmcg.asp 3. http://www.ibef.org/ (India Knowledge Centre) 4. http://115.113.225.49/webcms/Upload/FMCG%20Roadmap%20to%202020%20%20The%20Game%20Changers.pdf (FMCG road map to 2020)