According to Milind Karmarkar, veteran market expert, the answer lies in retail, not FMCG. “When we talk of consumption, we look at rising per capita income in India. Back in 2001, per capita income was about $400. Today, it stands near $2,600. In rupee terms, it has comfortably outpaced inflation. People simply have more money to spend—and that is visible across sectors, whether it’s finance, healthcare, tourism, or retail,” he explained in a conversation with ET Now.
From soaps to shopping carts
Karmarkar notes that FMCG companies—once the crown jewels of India’s consumption basket—have entered a mature phase. Hindustan Unilever, Colgate and others dominated the last two decades, but their growth has slowed. “In the past 25 years, companies like HUL have delivered only around 8% CAGR. Compare that with newer sectors, and you see at least three times that growth. FMCG is deeply penetrated; you can find sachets of shampoo in the remotest villages. Growth from here will be incremental, not exponential,” he said.
Instead, the baton has passed to retail. Drawing parallels with the U.S., Karmarkar pointed out how FMCG dominated the 1970s but was later overtaken by retailing giants. “The same trend is playing out in India. Retailers enjoy pricing power as they scale, and companies like Trent and DMart are examples of that shift. Even models like Star Bazaar with their own-label brands enjoy stronger margins,” he observed.
GST and beyond: The FMCG dilemma
The upcoming GST slab rationalisation may lower prices for soaps, shampoos, and toothpaste. But does that really spark fresh consumption? Karmarkar is cautious. “Toothpaste use is not going to double because prices fall. These companies are steady cash-flow machines, but they are in the mature phase of the corporate lifecycle. Unless they reinvent, they will not deliver high growth.”
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Investing in retail: patience pays
When it comes to retail stocks, valuation discipline is key. “You cannot buy Trent or DMart at just any price. These are strong structural stories, but one has to remain price-conscious. Every year the market gives opportunities, but these are long-term portfolio stocks—you buy, you hold, and if they fall, you add more,” Karmarkar advised.He cautioned that retail too is cyclical, tied closely to the broader economy. “From 2012 to 2017, Trent hardly moved. Investors who lost patience missed out on the subsequent rally. That is why you build positions gradually. For retail investors especially, the rule is simple: accumulate steadily, don’t rush.”
The road ahead
With India’s per capita income continuing to rise, the consumption canvas will only broaden—from healthcare and finance to leisure and travel. But within that canvas, retail seems poised to lead the next leg of the journey. For investors, the choice is less about whether to bet on consumption, and more about where within consumption the future growth lies.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
