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India’s consumer goods industry could post its slowest pace of revenue growth in a decade and a half this financial year, Credit Suisse said, even as category leaders Dabur and Godrej Consumer sounded more optimistic about sales revival in the second half of FY20.Liquidity constraints and lower farm incomes will likely affect revenues at India’s leading consumer companies, which Credit Suisse said had harnessed savings from the GST rollout and fuel costs to expand operating margins and earnings over the past few years.“Despite the slowdown over FY16-19, FMCG companies grew their earnings faster by expanding margins from levers like the fall in crude prices and GST savings,” Credit Suisse said in a report on the consumer sector. “We expect 2Q and 3Q FY20 to see a further slowdown in revenue growth of our coverage universe to about 5%. This will make FY20 the slowest year of growth for FMCG in 15 years. The last period of such low growth was 2000-03.”The BSE FMCG index has declined 7.4% in 2019 so far, while the broader Sensex has gained 1.4%.“Our recent interactions with Hindustan Unilever’s management indicate further moderation in growth across consumption categories. Rural remains under stress and category growth rates are now trailing urban consumption. The macro environment remains tough and recent measures such as budget and rainfalls will take time to show up,” said a CLSA report. “Following subdued 1Q FY20 results and further moderation in 2Q, there is risk to our sector earnings forecasts.” The local unit of Anglo-Dutch Unilever, long considered a proxy for broader consumer sentiment in India, posted sales growth of 7% during April-June, a seven-quarter low.Sales of consumer goods were disrupted in the immediate aftermath of the November 2016 demonetisation and in the runup to the rollout of GST, which subsumed all other indirect taxes. The sector expanded 10% in the three months to June, marginally slower than 10.6% in the first quarter of FY19. However, sequentially, revenue growth has been consistently declining in the past four quarters from their peak of 16.2% in the three months to September 2018.“The second half for consumer sector has historically grown slower than the first half. We expect growth over the next few quarters tapering off further. Also boosting demand through price cuts or discount is not feasible given low margins and increasing raw material costs,” said B Krishna Rao, senior category head at Parle Products that gets more than half its sales from rural markets.To be sure, some leading companies are still upbeat on a revival and expect better consumption demand in the second half of the financial year. Godrej Consumer Products (GCPL) said the current slowdown is temporary, although the pace of recovery will depend on actions New Delhi takes to help drive growth.“While there is stress in the current environment, leading to a demand slowdown, we do expect the situation for consumer staples to gradually improve in the second half of the fiscal year,” GCPL managing director Vivek Gambhir said. “On the back of a good monsoon, rural incomes should improve. The government is also taking steps to address liquidity concerns in the market. Given the lower penetration rates in many FMCG categories, we believe that the headroom for growth is tremendous.”Furthermore, most analysts said that larger companies can negotiate the broader economic slowdown better than smaller and regional ones. “FMCG industry growth has slowed over the last two quarters and is likely to be modest even in Q2. However, given the fact that larger FMCG companies have gained market share from smaller players, the impact of the slowdown has hit larger players to a lesser extent,” wrote Harit Kapoor and Bhakti Thacker of Investec in an investor note factoring an 11% average earnings growth for its FMCG coverage, despite estimated average revenue growth at 8.1% for FY20.“We are hopeful of seeing the green shoots of revival in the coming quarters with benefits of a likely fiscal stimulus reaching rural consumers,” said Lalit Malik, chief financial officer, Dabur India, which plans to increase its reach to 55,000 villages by March next year. "We are also expanding our product basket in the rural market by way of newer low-unit packs to feed these markets and push demand growth."Nielsen revised down its sectoral forecast for 2019, estimating growth in the 9-10% range, compared with its previous projection of 11-12%. The research firm, however, expects food categories to grow at a higher rate of 10-11%.Over the past decade, sales of branded daily needs in the nation of 1.3 billion people have increasingly relied on the rural hinterland, home to more than 800 million people, whose purchase behaviour is largely linked to farm output.India’s farm economy has been under strain. Agricultural output expanded 2.7% in the three months to December, the lowest in about three years.