Consider the following reasons for the growth of the FMCG (Fast Moving Consumer Goods) sector in India:
1. Increased disposable income and growing per capita expenditure.
2. Higher brand recognition and consciousness.
3. Invariable consumer preferences.
4. Foreign Central Banks increasing interest rates.
How many of the above are correct ?
(a) Only one
(b) Only two
(c) Only three
(d) All four
Explanation Statement 1 is correct: Increased disposable income and growing per capita expenditure boost demand for consumer goods because of increased purchasing power. This leads to multiple brands and products or even a product of varying quality to make a mark in the market.
Statement 2 is correct: Higher brand recognition and consciousness boost consumer awareness about products and brands. This awareness drives consumer behavior, who is usually price-sensitive, ready to experiment and choose among brands. This leads to increased market opportunities for various brands to capitalize, boosting the FMCG sector.
Statement 3 is not correct: Invariable consumer preferences lead consumers to choose among very few or maybe just one brand or product they feel loyal to. To give opportunities to multiple brands and products, boosting the FMCG sector, consumer preferences must be variable, i.e. constantly changing.
Statement 4 is not correct: When Foreign Central Banks increase interest rates, it incentivizes the companies of that economy to invest in their own. As a result, they start disinvesting globally. In India’s context, it is bad for the growth of the FMCG sector when FDI is driven out.
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