Nadir Godrej Sees Steady Rural And Urban Demand Despite Rising Input Costs

A mix of economic and category-specific factors is helping rural and urban demand remain steady, says Nadir Godrej, Managing Director of Godrej Industries and Chairman of Godrej Agrovet. 

"There was a slowdown on the rural demand side, and now that is picking up. Urban demand was holding up well, but it is slowing down a little bit now. Overall, the demand levels seem to be fairly steady," Godrej said.

Speaking at the NDTV Profit Conclave, he noted that certain segments within the consumer space, such as soaps and mosquito repellents, faced challenges due to non-economic factors.

"In Godrej Consumer Products, we had particular problems where demand was low, not because of economic reasons, but due to category-specific issues. Mosquito infestation was lower than usual, and high palm oil prices impacted soap sales," he said. 

However, he expressed confidence in a recovery, saying, That should be behind us now as it was a short-term phenomenon.

On inflation and price increases, Godrej pointed out that cost pressures are easing. "The latest inflation numbers show that food inflation is certainly slowing down, and other categories are also seeing signs of moderation. We are also capable of cutting costs despite inflation, so I don't think we will have to take very high price increases," he said. However, he acknowledged that some price hikes would still be necessary.

While volume growth is expected to return to pre-pandemic levels, Godrej indicated that the pace will be more moderate. "Earlier, we were used to 10-15% annual growth in volume; it’s more likely to be in the 5% range now," he said. 

When asked about the possibility of a return to double-digit growth, he said that it’s very unlikely in basic consumer products, although there is better growth in luxury products.

Godrej expressed optimism about the impact of the Union Budget, particularly for middle-class consumers. "The budget gives us hope that more people will be able to consume. The taxation thresholds have been increased, so I think there will be more consumption as we go on," he said.

Godrej also said that the recent corrections in equity valuations have not deterred consumer spending. People will be spending on consumption because of the budget’s impact, especially with more disposable income; spending will likely recover, he added.

On rural demand, Godrej pointed to a strong agricultural season as a key driver. "The rural market depends a lot on agricultural production. When we have bad monsoons, agricultural production falls, and demand for goods declines.

But this year, the crops are good, vegetable prices have fallen, and inflation is down. Farmers are struggling with low prices, but the overall crop output is strong, which supports rural consumption," he said.