consumption will increase

The coming year will be better for India from the economic point of view as the consumption momentum is expected to remain strong in the coming year, which will be supported by low inflation, long-term positive effect of cut in Goods and Services Tax (GST) and relaxation in income-tax and policy rates. These are the reasons which increased demand in 2025, and will continue to increase confidence in the coming year also.

Sakshi Gupta, Principal Economist, HDFC Bank, said in an ET report that looking at recent trends, we are coming into 2026 in a very strong position in terms of consumption momentum, which creates a good base for further growth. According to Paras Jasrai, Associate Director of India Ratings and Research, the main reasons for consumption are low inflation and improvement in salaries. Retail inflation fell to a record low of 0.25% in October. It averaged 2.5% in the first 10 months of 2025, whereas it was 4.9% at the same time last year.

Middle-income consumption will increase

Low inflation, which is expected to persist into 2026, said Aurodeep Nandi, India economist and executive director at Nomura. This will support the real income of households and profits of companies. He said that this will increase purchasing by middle-income people, although the fastest growth will come from rich buyers.

In July-September, private consumption reached the highest level in three quarters at 7.9%, whereas it was 7% in the previous quarter. It was 7.5% in the first half of FY26. Rajni Sinha, Chief Economist, CareAge Ratings, expects the pace to remain healthy, although private consumption may fall to around 7.3% in H2FY26 and 7% in FY27 as the good base effect of last year is waning and demand falls after festivals.

rural and urban consumption

The economist said that even though wages in rural areas are expected to increase and agricultural production is good, it is important to keep an eye on the formal job market. Economist Yuvika Singhal of QuantEco Research said that I would be more concerned about job creation and income, because these are very important for urban consumption momentum. Urban consumption also needs to grow in a big way from everyday items to premium products which are currently doing well only in the premium segment.