The report notes that tax relief, GST rationalisation, proposed eighth pay commission, and healthy rural incomes are likely to support household spending
Highlighting that segments like auto, electronics and discretionary consumption are showing accelerated sales growth in festival season, a report has revealed that India’s consumption trajectory for the near to medium term appears positive but conditional on a mix of domestic and international factors.
A report by PL Capital highlighted that domestically, tax relief, goods and services tax (GST) rationalisation, proposed eighth pay commission, and healthy rural incomes from a strong monsoon and robust kharif/rabi harvest are likely to support household spending.
India’s October 2025 manufacturing purchasing managers index (PMI) rose to 59.2 and September index of industrial production (IIP) grew 4 per cent year-on-year (YoY), with manufacturing up 4.8 per cent, signalling that producers are confident and ramping up production in anticipation of sustained domestic demand.
The report further added that overall payment volumes increased from Rs 9,100 billion in FY2025 to Rs 12,160 billion in FY2026, showing continued growth in aggregate payment activity, but typically at a slower rate than during festival peaks.
“For FY26 and FY27, a combination of domestic policy and macro factors is expected to continue supporting consumption and private consumption (PFCE). Rate cuts (100 basis points), income-tax reductions and GST rate reduction will raise household disposable income and lower effective retail prices,” the report noted.
PL Capital further explained that the proposed eighth pay commission will boost government salaries and pensions, supporting urban consumption, and a good monsoon will strengthen rural incomes, particularly in agriculture-dependent areas.
While these factors create a favourable environment for both rural and urban households, the report warned that the United States (US) trade tariffs and global economic uncertainty act as a frag for runaway increase in domestic demand.
The report highlighted that while demand for premium and luxury segments has been strong, the demand stress has been in the rural India and at the mass and mid end of the market. Rural India showed signs of demand re-bound and has been growing faster than urban India from the past few quarters, it said.
