‘Consumer goods volumes likely to grow in tandem with GDP’

MUMBAI: The 11% underlying volume growth in the December quarter reported by Hindustan Unilever Ltd (HUL), India’s largest consumer packaged goods company, indicates that the consumer goods sector has recovered from the twin shocks of demonetisation and the implementation of the goods and services tax (GST).

While Sanjiv Mehta, managing director and chief executive officer of HUL, is bullish about the growth potential of the country, he is worried about the possibility of growth getting disrupted again. In an interview, Mehta spoke about how the maker of Dove soaps, Knorr soup and Surf detergents is preparing for the future. Edited excerpts:

You have reported doubledigit volume growth in the December quarter. Can we take this as an indication of market recovery and demand picking up?

If we look at the period between 2013 and 2016, the FMCG (fast-moving consumer goods) market volumes grew at 3% whereas the GDP (gross domestic product) growth rate of the country was, on an average, 6-6.5%. The GDP growth rate was ahead of the market volumes growth rate. However, during this same period till 2015, rural volumes were growing at 1.5-1.6 times that of urban volumes. It was in 2016 that the rural volumes came down and grew at the same rate as the urban volumes. Now, going forward, it would be fair to expect that India’s FMCG industry volumes growth should grow in tandem with the GDP growth rate of the country and that is based on the premise that we take steps to have more inclusive growth.

We keep talking about India’s huge growth potential, but we are yet to see consumption take off. When will it happen?

If we look at it from a purchasing power parity basis, we have now reached over $6,000 per annum and now, from here, even if we continue to grow at 6-7%, leave aside 8-9% that we aspire for, we will see the compounding effect as we have reached a certain threshold base. And if we repeat the performance of GDP growth rate of the last 25 years into the next 25 years, India will become a very different country. I am very bullish about our country and for Unilever to realise its potential.

You spoke about inclusive growth earlier. But some studies have pointed out that India’s growth has not been inclusive and the gap is widening between the rich and the poor.

If you look at the figures by Thomas Piketty (French economist) it certainly indicates that there is room for much more inclusive growth. For us to reap the benefit of demographic dividend, we have to have inclusive growth. Inclusive growth would certainly mean that we would have to create more source of livelihood, more employment. Today in India, urbanisation has not even started. It will definitely put less stress on rural India but then the country will have to create the infrastructure.