(This story originally appeared in on Oct 18, 2019)

MUMBAI: The decline in rural market growth to 5% in Q3 of 2019 as compared to 20% in the corresponding quarter last year has contributed 60% to the FMCG industry slowdown , according to Nielsen’s report.In a year’s time, the rural FMCG growth rate has gone down to a quarter of what it was in Q3 of 2018, and for the first time in seven years, rural growth has dipped below that of urban, said Sunil Khiani, head (retail measurement service), Nielsen South Asia.The overall FMCG growth has come down to 7.3% in Q3 of 2019 from 16.2%. “A more worrying sign is that consumption is shrinking. From 13% consumption-led growth, the numbers are down to 3.9%,” Khiani said, adding that the situation had impacted small manufacturers more as they struggle to sustain lower volumes. This affects pricing, and the dynamics of Indian trade does not allow them to expand further.But Nielsen sees the bleak situation bottoming out in Q4.Nielsen’s report expects an uptick in the first quarter of the next calendar year.A silver lining is that modern trade is bouncing back. Modern trade (13% growth across India) is growing ahead of general trade (7% all-India) fuelled by metros like Mumbai Nielsen has maintained its annual forecast at 9-10% for calendar year 2019. Nearly half of the FMCG slowdown has come from the north, a region which makes for 30% of the overall FMCG rural volumes.South, on the other hand, is plateauing and holding on to the growth rates.Apart from a flood situation in the north, stress in disposable incomes is said to be taking a toll on consumers and manufacturers. The gap in unemployment rates between north and south has widened from 3.6% in Q1 of 2018 to over 10% in Q3 of 2019, revealing that more unemployment is setting in the north zone, Nielsen said, quoting numbers from the Centre for Monitoring Indian Economy. The auto sector distress is said to have added to unemployment rates in the north, impacting disposable incomes in the region.Unemployment is more manifested in rural parts of the country, with total jobless rates going up from 5.6% to 7.8%. Moreover, rural inflation grew at 28% between Q2 and Q3 of 2019.When impact of lower wages is added to this—34 out of 35 states in the last 10 years have seen a lower increase in wages—it further reduced incomes, said Khiani.The impact of rural distress is more pronounced on small players who, Khiani said, are getting wiped out. Growth in rural distribution has remained flat too.