How Budget 2026 Can Reignite FMCG Demand Across India

              By Krishna Khatwani, Head of Sales - India, Godrej Consumer Products Ltd

The Union Budget 2026 will arrive at a time when the FMCG sector would see the building blocks for a sustained consumption upcycle fall into place. GST rationalisation, income tax relief, benign inflation, and supportive rural schemes over the last year have created a foundation; the next Budget can determine whether this translates into broad-based, durable growth across both urban and rural India.

From a household’s lens, three levers will matter most: how much additional disposable income is created, how evenly it is distributed across segments, and how predictably it flows into daily consumption rather than one‑time spending.

Consolidating the GST and tax stimulus

The first priority is to consolidate the gains from GST 2.0 and recent direct tax relief rather than introduce fresh complexity. GST reductions in October 2025 have already released substantial purchasing power into consumers’ hands and lowered shelf prices in several mass categories. Historically, such moves have been followed by a visible lift in FMCG volumes.

Budget 2026 can amplify this impact in two ways. One, by extending lower GST rates to the few remaining every day-use categories still at higher slabs, especially in home and personal care, so that the benefits of GST 2.0 are truly broad-based. Two, by ensuring faster refunds and rationalising inverted duty structures in select value chains, so that working capital locked in taxes can be redeployed into pricing, innovation, and distribution.

On the income tax side, even modest relief for lower and middle-income households tends to flow quickly into FMCG, because these consumers spend a higher share of incremental income on essentials and small indulgences. Combined with low, stable inflation and soft commodity prices, further tax relief would strengthen the case for a sustained consumption recovery rather than a one-quarter spike.​

Unlocking rural consumption

Rural India has led urban growth for a few quarters, a return to the long-term pattern where rural volumes typically grow faster off a lower base. Good monsoons, higher MSPs and continued rural infrastructure spending can convert this into a stronger consumption runway in 2026. Budget allocations that protect farm incomes, accelerate rural infrastructure and digital connectivity tend to show up in FMCG shelves in the form of more categories adopted and gradual up-trading.

For the FMCG industry, rural growth still rests heavily on low‑unit price packs. The Indian category model remains built around ₹10 and ₹20 price points and there is still significant runway for penetration through these accessible formats. A benign commodity and tax environment enables companies to protect or enhance value at these price points without compromising on quality, which in turn keeps the rural consumption engine humming.

The next Budget can reinforce this by avoiding indirect cost escalations that would force steep price hikes at the bottom of the pyramid. Any targeted schemes that put cash directly into rural households’ hands, particularly women-focused or livelihood-linked programs, tend to have a high FMCG multiplier, because they quickly translate into higher offtake of personal care, home care, and packaged foods.​

Re‑energising the urban consumer

Urban consumption, especially in traditional general trade, has been slower than it should be, even as quick commerce and parts of modern trade grow strongly. Yet urban middle-class households stand to gain disproportionately from GST cuts on packaged foods and income tax reductions, given their higher participation in these categories.

Budget 2026 can tilt sentiment decisively by signalling continuity on tax and inflation, while supporting job creation and entrepreneurship in urban India. For FMCG, a confident urban consumer upgrades more frequently, moving from unbranded to branded, from basic to specialised products, and from bar formats to liquids or higher-value formats. When this is combined with rapidly scaling channels like quick commerce, which are still seeing rapid growth, the result is a powerful engine for urban FMCG demand.

From stimulus to sustainable consumption

Over the past year, sector leaders have described the policy backdrop as unusually supportive: low inflation, GST reductions, and tax cuts all pointing in the same pro-consumption direction. The Budget now has an opportunity to shift the conversation from “stimulus” to “sustainability”. That means prioritising clarity over constant change, consumption over distortionary subsidies, and broad-based affordability over narrow incentives.

If Budget 2026 can maintain fiscal discipline while keeping money in consumers’ hands, simplify and deepen GST benefits for mass categories, and continue to back rural incomes and urban job creation, FMCG consumption across India can move from a patchy recovery to a more predictable growth trajectory. For the industry, that would mean not just a better year, but the foundation for a more resilient decade.