Ad sector eyes stronger H2 as rural consumption recovers

After months of muted sentiment and cautious spending, India’s fast-moving consumer goods (FMCG) sector has staged a meaningful comeback in Q2 ending September—driven primarily by a sharp rise in rural consumption. Industry trackers note that this upturn, supported by better monsoons, easing inflation, improved reservoir levels, broader credit availability and rising income indicators, has renewed confidence across core FMCG categories and strengthened the sector’s overall growth outlook.

For the first time in several quarters, rural consumption has decisively outpaced urban demand, according to Motilal Oswal Financial Services (MOFSL). Its latest ECOSCOPE report, “Rural Rules, Urban Follows,” notes that rural India continues to drive the country’s consumption recovery even after income-tax cuts and GST 2.0 reforms aimed at boosting urban spending. Rural consumption has been rising steadily since the second half of FY25 and accelerated sharply in Q2, growing 7.7% YoY—its strongest performance in 17 quarters. The momentum has been underpinned by firm growth in agricultural and non-agricultural wages, higher tractor and fertiliser sales, robust farm credit, and improved sowing due to better rainfall and reservoir conditions. Easing input costs and stable MSP procurement have further strengthened farm incomes.

And with this recovery coinciding with the onset of the festive cycle, advertising players—who saw a subdued H1 despite the rollout of GST 2.0 reforms—are now pinning hopes on a broad-based revival in the next two quarters. Together, Q3 and Q4 account for nearly 60% of India’s more than Rs 1-lakh-crore advertising market though some of the categories spend more in Q1 to align with some of the biggest sports properties such as IPL. 

Notably, the FMCG remains the country’s biggest advertising spender, clocking an estimated Rs 32,000 crore in 2024. The category alone contributed nearly one-third of all digital ad revenues, adding about Rs 15,000 crore to the digital advertising pie.

Urban demand, meanwhile, remained relatively subdued through Q2 as consumers deferred big-ticket purchases ahead of the festive season. Indicators such as personal credit demand, petrol consumption and non-farm imports showed stability in daily discretionary spending, but overall momentum softened after a stable first quarter. Early Q3 data now shows improving urban sentiment, aided by GST 2.0-related price pass-throughs, stock replenishment and a clearer retail environment. Performance, however, remains uneven: autos and jewellery have seen strong traction while textiles, footwear, paints and parts of FMCG continue to show mixed trends.

Also read: Why GST overhaul & festive season didn’t spark AdEx revival?

Clear but cautious momentum in H2 

As reported by exchange4media on Monday, H1 of this fiscal remained muted for the advertising sector, with television and digital—the two largest mediums—staying flat in September and October compared with August, according to TAM data.

Even as auto and FMCG brands increased spending to capitalise on the GST reset, the government’s ban on real-money gaming (RMG) wiped out nearly 86% of gaming revenues, creating a ₹9,000–10,000 crore gap in the ad market, industry observers told e4m.

However, analysts expect H2 to deliver a strong bounce-back, supported by firmer rural demand, improving urban sentiment and restocking cycles. MOFSL projects real GDP growth of 6.8% for FY26, with a 20–30bps upside if tariff uncertainties ease. Nominal GDP growth is expected at 9%, tempered by softer price pressures.

Ashish Goupal, CEO - India Core Business, Marico Limited, says, “At Marico, we view our media strategy as a powerful lever that helps us forge meaningful connections with our consumers and translate insights into business outcomes. We always follow a balanced and long-term approach to media investments. While the recent improvement in rural consumption is an encouraging sign for the sector, our strategy continues to be guided by our category priorities and brand objectives, ensuring consistent brand-building and sustainable growth across markets.”

Mayank Shah, Vice President, Parle Products, says autos and durables saw a clear lift post GST reforms, but FMCG players couldn’t immediately leverage the benefits. “A Rs 10 pack of 100g biscuits effectively dropped to Rs 8.90 after GST 2.0. Modern trade pushed us to round it off, so it became a Rs 9 pack—creating multiple MRPs for the same product. We’re now stabilising with a fourth MRP: a Rs 10 pack at 110g.”

The transition disrupted supply chains. “High-volume categories like biscuits often move two to three truckloads a day into organised retail. During the shift, that dropped to a single truck or sometimes none because of pricing confusion. Naturally, FMCG players held back on advertising,” Shah said.

He expects GST-led benefits to fully stabilise by December. “From January, we anticipate marketing spends to begin rising, with at least a 10–15% uptick in Q4 FY26. For now, ensuring adequate stocks nationwide is the priority.”

Despite transitional complexities, most FMCG majors reported healthy topline and bottom-line growth in Q2. Daily essentials, personal care, home care and select discretionary categories are showing steady recovery, typically a precursor to heightened ad spending.

Dabur, for instance, reported market-share gains across 95% of its India portfolio and told investors it will step up investments in premiumisation, digital transformation and distribution expansion.

However, the recovery in H2 won’t be broad-based; it will be selective, sharper, and far more strategic, with categories that have strong rural relevance leading the way, Rajiv Dubey, Vice President, Dabur India, points out: “The outlook for the coming quarters remains encouraging. Players will step up our marketing spends in line with the growth of each category.”

Agencies are closely watching sales and consumption trends across FMCG, rural retail, and semi-urban markets to understand where real demand is building, shares Ahmed Aftab Naqvi, Global CEO and Co-founder, Gozoop Group. “Media efficiency metrics like CPMs and CPCs are also helping us gauge whether incremental budgets are delivering value. Some categories—such as mobile phones and quick commerce—are already accelerating faster than traditional sectors. Brands are taking a test-and-scale approach: starting small, learning quickly, and investing where ROI is clear.”

Boost for FTA, CTV, Radio & Digital 

Media agencies are already seeing momentum build. Clients across FMCG, agri-inputs, durables and telecom are recalibrating their H2 plans to tap deeper into Bharat, said Anil Solanki, Media Lead, dentsuX.

“We’re seeing a decisive shift toward high-reach TV, FTA channels and regional radio, supported by value-led messaging and more culturally grounded storytelling. At the same time, interest in hyperlocal digital, vernacular influencers and rural retail activations has surged as brands look to convert this early rural revival into sustained buying,” Solanki said.

Brand leaders agree. “Free-to-air channels and connected TV are drawing most of the FMCG ad spends. Pay TV investments are tapering,” said a senior media executive.

Even categories that stayed conservative through H1 are now exploring incremental budgets for October–December—especially if rural momentum holds through another cycle.

Industry insiders say brands are likely to use H2 to resume long-term brand building after a year of cautious, performance-heavy communication. If rural markets continue to outpace cities, FMCG will likely lead the advertising rebound, followed by e-commerce, retail, auto, smartphones and regional advertisers.

Hyperlocal targeting

There’s a renewed focus on hyper-local targeting from regional language digital campaigns on WhatsApp and Facebook to outdoor in key mandis and highway touchpoints. Radio and vernacular OTT are also seeing increased allocations because these channels have consistently delivered rural engagement, Naqvi points out. 

Creative strategy is shifting toward contextually relevant storytelling. Brands are moving beyond generic messaging to tap into festive moments, crop cycles, and rural livelihood themes—campaigns that align with local rhythms. We’re seeing a clear shift in tone and visual language as brands prioritise cultural nuance instead of repurposing urban narratives for rural audiences. 

“The focus now is on presence with meaning, ensuring every touchpoint feels relatable while still driving consideration and purchase intent”, Naqvi explains.