Mass consumption is back, but AI will define the next growth phase for FMCG

India's FMCG sector is showing signs of a broader consumption recovery, with volume-led growth strengthening across urban and rural markets after several quarters of premiumisation-led demand. As companies report improving first quarter earnings, the next phase of growth is expected to be shaped by artificial intelligence, resilient supply chains and decentralised manufacturing, according to Deloitte.

"Somewhere post the GST reforms of last year, volume growth has come back to these sectors. The volumes are already there," Anand Ramanathan, partner and consumer industry leader, Deloitte South Asia, told Fortune India. "Quarterly results show strong volume growth. Mass consumption has come back into the economy and it is no longer dependent only on premiumisation." 

Companies including Hindustan Unilever, Nestlé India, Dabur and Godrej Consumer Products, in their Q1 FY27 earnings, pointed to improving demand trends, with urban markets showing signs of recovery while rural consumption remained resilient. More importantly, volume growth, rather than price hikes alone, is beginning to drive sales.

Ramanathan said favourable weather conditions, improving farm prospects and India's ability to manage inflation despite geopolitical disruptions have helped strengthen consumer sentiment.

"The whole sector has favourable tailwinds," he said. "India has been performing really well in managing geopolitics and fuel demand. Most of the economy is cushioned against very high inflation and that is supporting FMCG and retail demand." 

The outlook is echoed in Deloitte's latest Consumer Trends IGNITEing Growth and Governance report, which projects India's retail market to expand from about $1.2 trillion to $1.9 trillion by 2030, while the FMCG sector is expected to grow from around $289 billion in 2025 to nearly $643 billion by the end of the decade. 

AI moves from the back office to the shopping basket

Meanwhile, artificial intelligence is increasingly beginning to influence how Indians shop, signalling a fundamental shift in consumer behaviour as the country's consumption story enters its next phase.

According to the report, 42% of Indian consumers are now comfortable allowing AI to make purchases on their behalf, provided they set the spending limit. That marks a significant evolution from AI merely assisting consumers with product discovery and comparisons to becoming an active participant in purchase decisions. 

"There used to be a lot of focus on enterprises looking at AI. But now we are seeing consumers themselves have accepted AI making buying decisions for them," shared Ramanathan. "Forty two percent of consumers are saying they will use AI to buy and make the decision on the purchase as long as it is within a budget that they specify."

The report finds that AI is becoming increasingly embedded across the shopping journey, from research and comparison to personalised recommendations. It also notes that 64% of Indian consumers already use AI tools instead of traditional search engines while researching products, highlighting how rapidly consumer behaviour is evolving. 

Transparency and resilient supply chains emerge as priorities

Beyond AI, Deloitte identifies transparency as another defining trend. Ramanathan said consumers are increasingly willing to reward brands that provide credible information about ingredients, sourcing and sustainability.

"One in two consumers are saying that they will pay 10% more if there is greater transparency on the pack, whether it is about ingredients or social impact that is substantiated," he said.

The report also points to a broader transformation taking place behind the scenes. Supply chains, once designed primarily for efficiency and lower costs, are now being rebuilt around resilience as companies respond to repeated disruptions caused by the pandemic, geopolitical conflicts, inflation and climate events. 

"They have moved from efficiency to resilience," Ramanathan said. "Companies are using AI to improve forecasting and moving manufacturing closer to consumption centres rather than where production is cheapest."

According to him, AI could generate 8% to 10% cost savings across the value chain, while 61% of companies surveyed are investing in upskilling employees for AI adoption. The bigger challenge now is not proving AI's value but scaling it across organisations.

"The POCs (Proof of Concept) are beneficial. But unless and until you scale them, you will not get enterprise level benefits," he said. "Companies are now taking a three to five year roadmap instead of fragmented investments."

Ramanathan expects manufacturing to increasingly shift outside metro cities as supply chains become more decentralised. Food manufacturing, he said, will move closer to farm gates while discretionary products will be produced nearer urban demand centres, creating significant employment opportunities.

He believes those that successfully combine resilient operations with technology driven decision making will be best placed to capture the next wave of India's consumption growth.