The report noted that the festive season and goods and services tax (GST) rate cuts are expected to boost demand in the third quarter of the current financial year
Highlighting that the consumption trends were mixed in the second quarter of the current financial year (Q2FY26), a report by Icra has noted that the festive season and goods and services tax (GST) rate cuts are expected to boost demand in Q3FY26.
In a report, Icra added that while the gross domestic product (GDP) dataset suggests that the growth in India’s Private Final Consumption Expenditure (PFCE) has improved to 7.9 per cent in Q2FY26 from 7 per cent in Q1FY26, the growth in nominal terms has remained lacklustre at 9.3 per cent, well below the consistent double-digit growth that was seen in this indicator through FY2025.
“This is reflected in the mixed trends seen across consumption categories. FMCG companies saw a deceleration in their growth rates in Q2 vis-a-vis Q1, amid transitory channel disruptions as well as some likely deferment of purchases ahead of the GST rate rationalisation, along with the adverse impact of excess rainfall. Besides, the revenue growth of discretionary items such as alcoholic beverages and quick service restaurants (QSR) was lacklustre in the quarter,” Icra pointed out.
However, the report noted that the pan-India premium hotel occupancy levels were firm in Q2FY26, driven by business travel, Mice and leisure travel, and have also improved further in October-November 2025, even as the performance of domestic air passenger traffic remained weak.
Icra emphasised that the sales for home improvement players, in the tiles and paints categories, were also muted in Q2FY26. The GST rate cuts likely led to a deferment of purchases of durables such as passenger vehicles (PVs) and two-wheelers, which have later seen a surge in sales in October-November 2025.
The report added that the growth in rural wages has largely remained steady, although real wages have inched higher, aided by cooling consumer price index (CPI) inflation. While the growth in the corporate wage bill remained subdued in Q2FY26, the unemployment rate in urban areas has inched up to an 11-quarter high of 6.9 per cent, as per the report.
