Rural Demand Outpaces Urban Growth Again, Here's Which Sector Sees Strong Momentum In Q2 2025

New Delhi: India’s rural demand surged ahead of urban consumption in the April-June quarter of 2025, according to a new report by global research firm NielsenIQ. Buoyed by easing inflation and a favourable monsoon outlook, rural markets were instrumental in driving the packaged consumer goods (FMCG) sector’s growth. The report highlighted that rural areas grew at twice the pace of cities, positioning themselves as the key drivers of volume expansion across categories. Smaller towns also contributed to the urban recovery, but rural markets remained the standout performer in terms of consumption momentum.

Small Manufacturers and E-commerce Gain Ground

The data shows that small players in the FMCG space are expanding more rapidly than larger competitors, particularly in home and personal care (HPC) segments. While food categories showed moderate growth, HPC volumes continued to accelerate, driven by increased consumer spending and penetration. E-commerce saw a notable uptick in shopper engagement, especially in non-food categories, as consumers increasingly turned to online platforms for daily essentials. Sharang Pant, head of FMCG customer success at NielsenIQ, noted that a mix of softening inflation and strong agricultural prospects had set a positive tone for the sector’s outlook.

Strong Q2 Performance with Optimistic Outlook

The FMCG sector recorded a 13.9 percent value growth in Q2 2025 compared to the same period last year, improving from the 11percent year-on-year growth registered in Q1. The earlier quarter’s growth was attributed to a 5.1 percent rise in volume and a 5.6percent increase in prices. Interestingly, the growth in unit sales outpaced overall volume growth, indicating a consumer preference for smaller packs, likely driven by price sensitivity and increased rural participation. Roosevelt Dsouza of NielsenIQ noted that while smaller players are currently benefiting from a low base and market shifts, their sustained growth remains to be observed.

Policy Support and Economic Fundamentals Remain Strong

According to the Reserve Bank of India, rural demand—alongside strong government capital expenditure—continues to support private consumption and broader economic activity. RBI Governor Sanjay Malhotra emphasized that above-normal monsoons, controlled inflation, and supportive policy frameworks are creating a favourable environment for continued domestic growth.