Tougher comparison
The GST rationalisation that took effect on 22 September 2025 gave India’s consumption story a significant boost. By reducing taxes across everyday essentials and big-ticket purchases, the government sought to put more money in consumers’ hands and stimulate demand. The changes included cuts from 28 per cent to 18 per cent on air conditioners, dishwashers, televisions, small cars and motorcycles of up to 350 cc. Several packaged food products, toiletries and household goods saw GST reduced to 5 per cent, while Indian breads became tax-free. Cement and medicines also benefited from lower rates.
The impact extended beyond the checkout counter. Lower GST rates on essentials can ease household expenses, while reductions on appliances and vehicles can make long-postponed purchases more affordable. For manufacturers and retailers, the changes offered an opportunity to convert pent-up demand into sales. However, the extent of the benefit to consumers depends on how fully tax reductions translate into retail prices. For households considering a new appliance or vehicle, the timing was favourable.
But the tax cuts have now been in place for over a year. The initial price advantage is no longer new, making it harder for companies to replicate the growth seen during the transition. In 2026, sales depend increasingly on replacement cycles, income growth, financing options and consumer confidence. GST relief remains a structural support for consumption, but it cannot by itself guarantee another festive boom.
Consumer’s Spending Dilemma
This year’s festive signals are mixed. Shoppers Stop has reported healthy premium demand. Kalyan Jewellers has posted robust revenue growth. Meesho has seen strong festive order growth and Amazon reported rising purchases of everyday essentials in Tamil Nadu. Yet, the momentum is uneven: auto sales have moderated. Counterpoint Research expects smartphone volumes, to decline despite higher market value and fireworks makers face rising input costs and uncertain demand. For businesses, the question is no longer simply whether festive sales will grow. It is whether consumers are buying more goods, paying more for the same products or bringing purchases forward from subsequent months.
The festive calendar this year adds another complication. Diwali falls on 8 November 2026, in the third quarter of the Indian financial year. The timing of Navratri and the wider festive shopping period can shift across reporting periods, affecting quarterly comparisons and making year-on-year performance harder to interpret. Meanwhile, household budgets face renewed pressure. Official data put retail inflation at 5.54 per cent in September 2026, with food inflation at 7.74 per cent. The Reserve Bank of India also raised its policy repo rate by 25 basis points to 5.50 per cent in October. Rising food bills can squeeze discretionary spending, while borrowing costs matter for consumers considering expensive purchases.
The challenge for retailers this festive season is to turn consumer interest into actual spending, as households balance festive aspirations against rising living costs and tighter budgets.
The economic environment is also less comfortable for households. The result is a more demanding comparison with 2025. Tax relief continues to support affordability in eligible categories, but companies must now establish whether underlying consumption can sustain growth without the one-time boost that accompanied the introduction of the revised rates.
Auto Sales: A Festive Reality Check
India’s automobile market has hit the festive season at full throttle, but not every segment is moving at the same speed. After a strong first half of FY27, the latest retail numbers suggest that last year’s exceptional buying spree may be difficult to replicate. VAHAN data show vehicle sales touching 15.6 million in the first half of FY27, up 21.1 per cent year on year.
Growth accelerated from 16 per cent in the first quarter to 26.9 per cent in the second. Yet, the momentum appeared to have softened during Navratri. The Federation of Automobile Dealers Associations (FADA) recorded 11.23 lakh retail sales, down 6.52 per cent from a year earlier. Passenger vehicles fell 21.91 per cent, while two-wheelers declined 2.79 per cent. Commercial vehicles bucked the trend, growing 1.12 per cent. The comparison, however, comes with a caveat. Navratri lasted 11 days in 2025 against 10 days this year, while the GST 2.0 rollout had pulled forward pent-up demand into last year’s festive window.
In the immediate 16 days of the festive, two-wheeler registrations have grown by 10 per cent as per the Vahan portal, driven by 150cc-plus motorcycle segment and the EV scooters.
Motorcycle maker Bajaj Auto expect growth to continue in double digits in the September-December period.
Leading car maker Maruti Suzuki has said that the underlying demand environment remains robust. Retail sales from the beginning of the festive period—that is, Onam till Dussehra on 20th October—grew by around 30 per cent compared with the corresponding period last year. Retail sales from the period Ganesh Chaturthi through Dussehra grew even faster at around 35 per cent year-on-year, it said.
FADA president Sai Giridhar believes the underlying picture remains healthy, noting that sales were nearly 27 per cent higher than in the corresponding period of 2024. Inventory levels offer another clue. Passenger-vehicle stocks have fallen to around 43–45 days from approximately 60 days a year ago, suggesting dealers are better positioned despite uneven demand. Still, affordability remains a concern. Automakers have raised prices amid higher input costs linked to the West Asia conflict. “Demand may moderate during the third quarter on the back of a higher base over the previous year, El Niño effect and the recent repo rate increase,” pointed out Arnab Banerjee, Managing Director and Chief Executive Officer of CEAT.
The picture also varies by segment. Rural two-wheeler replacement demand remains supportive, while commercial vehicles depend on freight and infrastructure activity. Electric vehicles offer a brighter spot. FADA reported Navratri retail growth of 26.78 per cent, lifting their market share to around 10.5 per cent from 7.7 per cent. “While replicating last year’s exceptional performance may be challenging, the underlying demand drivers remain encouraging,” stressed Rajesh Dahiya, Vice President & Commercial, Apollo Tyres. The real test lies ahead: whether festive bookings translate into Diwali deliveries. India’s auto market remains resilient, but the road to growth is becoming increasingly uneven.
More Money, Fewer Phones
India’s festive electronics market presents a curious paradox. Consumers may spend more, even as they buy less. For manufacturers and retailers, the distinction between rising revenue and rising demand has never been more important. Counterpoint Research expects smartphone volumes to fall around 12 per cent during this 2026 festive season, even as market value rises approximately 5 per cent. Higher memory costs are pushing up device prices, allowing average selling prices to lift revenue despite fewer units being sold. In other words, a bigger bill does not necessarily mean a bigger buying spree.
“The key challenge remains affordability,” pointed out Shubham Singh, Research Analyst, Counterpoint Research. Higher device prices and fewer aggressive direct discounts are making consumers more cautious. Exchange offers, bank discounts and equated monthly instalments (EMIs) are becoming increasingly important. Consumers are also holding on to their existing smartphones for longer. “The longer replacement cycle is also putting pressure on demand. Consumers are holding on to their existing smartphones for longer and upgrading only when they see a strong value proposition,” Singh further added.
The pressure extends beyond phones. Counterpoint Research expects television shipments to decline by 4 – 5 per cent and PC sales by 3 – 4 per cent during the festive season. Premium devices offer some support, but rising prices are making entry- and mid-range products harder to justify. Inventory trends reinforce the caution. Omdia, a market research firm, estimates that smartphone shipments fell 26 per cent to 35.8 million units between July and September, the lowest level for this quarter since 2016. With Diwali falling later this year, retailers stocked up later than usual. Weaker demand and cautious ordering by retailers also contributed to the decline. However, shipments measure phones sent to retailers, not those actually bought by consumers during the festive season.
For electronics makers, the challenge is to give consumers a compelling reason to upgrade now rather than wait. Easy financing may soften the upfront burden, but it cannot erase higher prices or stretch household budgets indefinitely. This festive season, the real test is not how much consumers spend, but how many purchases they are willing to make.
Retail Therapy
While consumer electronics face a slowdown amid price pressures and cautious spending, the apparel sector is seeing more encouraging signs, particularly in the premium segment. Organised retailers have reported healthy demand for premium apparel. From family celebrations to weddings and gifting, clothing continues to command a place in the festive shopping basket.
Shoppers Stop reported growth during the Puja and Dasara periods, with demand spanning men’s wear, women’s western wear and Indian wear. September ending quarter revenue rose 8.72 per cent year on year to Rs 1366.27 crore. Premium merchandise accounted for 73 per cent of department store sales, while the average transaction value climbed 9 per cent. The company also returned to profitability. The numbers point to consumers willing to spend on premium products, although higher transaction values do not necessarily mean more garments are being purchased.
Vishal Mega Mart, too, reported an encouraging start to the festive season. “We had a strong start to the festivals and this has reinforced our confidence in the demand momentum as we approach Diwali and the wedding season,” said Gunender Kapur, its founder, chief executive and managing director. Online marketplaces are adding to the momentum, with sarees, kurta sets, children’s clothing and accessories among popular festive purchases. Spending is also spilling over into grooming, home décor and entertaining essentials. The emerging picture is one of selective indulgence. Consumers are keeping festive traditions alive, but retailers must offer the right mix of products and prices to turn that enthusiasm into sales.
Jewellery Shines Through the Festive Season
While apparel retailers are seeing encouraging demand, jewellery offers another bright spot in India’s festive spending story. Deep-rooted traditions around gold, silver, weddings and gifting continue to support purchases, even as consumers remain selective about discretionary spending.
Kalyan Jewellers reported consolidated revenue growth of over 26 per cent in Q2 FY27. Its India operations grew approximately 27 per cent, with same-store sales rising around 20 per cent. Candere, its lifestyle jewellery brand, recorded revenue growth of about 64 per cent. These figures, for the quarter ended 30 September, provide a strong pre-season indicator. Kalyan said it was preparing for the season with fresh collections, marketing campaigns and new showroom launches.
An executive at the Malabar Gold & Diamonds pointed out to the changing buying habits. Festive purchases extend beyond gold jewellery to silver gifts and devotional articles associated with Navratri and other customary occasions. Convenience is also shaping shopping decisions, with customers increasingly buying jewellery close to home or while travelling to attend functions. “Five years ago, a whole day would be set aside for shopping. Today, people just come and do their shopping on the way to attend a function,” pointed out the executive. This shift highlights the importance of accessible showrooms, fresh designs and smaller gifting purchases in driving sales. But gold prices complicate the interpretation of growth. When the price per gram rises, a jeweller can report higher sales value even if the weight of gold sold grows more slowly. Customer numbers, average ticket size, grams sold and revenue are different measures.
Everyday demand meets higher input costs
Rising input costs and changing consumption patterns are complicating the growth outlook for consumer-goods companies. “Higher raw-milk prices has prompted significant price increases in ghee, paneer and curd, which together account for over 90 per cent of the company’s sales,” points out Srideep Kesavan, CEO, Heritage Foods. While paneer and curd sustained volume growth, ghee volumes remained flat. With ghee demand closely linked to festive occasions, Kesavan expects volumes to improve in Q3 as Dasara and Diwali fall within the quarter. Tamil Nadu’s state run dairy cooperative Aavin has also raised prices of ghee and other products.
Online marketplaces offer another window into this expanding demand, particularly beyond major cities. Meesho reported a 75 per cent year-on-year increase in orders on the first day of its Mega Blockbuster Sale. Transacting customers grew 60 per cent and sellers 63 per cent, while participation from Tier 4 and smaller markets more than doubled. Orders through Meesho Mall, its branded-shopping offering, rose over 200 per cent, while content-commerce orders increased 3.7 times.
Amazon reported 100 per cent year-on-year growth in shopping volume on Day 1 of its Great Indian Festival. In Tamil Nadu, purchases of everyday essentials doubled compared with a regular day. The company also recorded stronger purchases of baby-care and pet-care products, oatmeal, seeds and dry fruits. Together, these trends point to the growing importance of everyday categories in India’s festive consumption story. Digital platforms are widening access to products, while routine household purchases are contributing to online order growth. Redseer Strategy Consultants projects India’s online retail market will exceed USD 90 billion in 2026, with festive-season gross merchandise value reaching USD 15–16 billion, up around 25 per cent. These remain forecasts, not confirmed full-season results.
However, the figures require careful interpretation. Meesho’s headline growth compares orders year on year, while Amazon’s Tamil Nadu figure compares purchases with a regular day. Neither establishes an equivalent rise in overall household consumption. Amazon also reported a doubling of EMI transactions during its festive sale, suggesting financing is helping customers complete purchases while spreading payments over time.
For FMCG companies and online retailers alike, the challenge is to distinguish new demand from price-led growth, more frequent purchases and a shift from physical stores to digital platforms. Agricultural incomes, monsoon patterns and food prices will influence everyday spending, while the affordability of larger purchases will shape discretionary demand.
Festive celebrations are hardly complete without crackers, making fireworks an integral part of Diwali spending. Yet, rising costs are putting the industry to the test. “80 per cent of annual business comes from Diwali. Higher raw-material costs have pushed up retail prices, raising concerns about sales volumes. While manufacturers explore new products and exports, the season will reveal whether consumers are willing to absorb the higher prices,” pointed out G Abiruben, Vice President, Tamil Nadu Fireworks and Amorces Manufacturers Association (TANFAMA) and MD Ayyan Fireworks Factory Private Limited.
Winning the AI recommendation
Artificial intelligence (AI) is changing how consumers discover products, compare brands and make purchase decisions, creating a new battleground for retailers during the festive season. Vikas Chawla, co-founder of Social Beat, describes a shift from browsing multiple search results to seeking recommendations directly from AI tools. “Earlier, one would go to Google, click on five to six links, research and then decide. But today, the decision is made with the help of AI,” pointed out Vikas.
AI is also accelerating marketing production. According to Vikas, brands can generate hundreds of creative variations, highlighting different product benefits for different audiences. This enables faster campaign development and more targeted communication during the short festive selling window. E-commerce platforms are adopting similar approaches. Meesho reported that personalised recommendations powered approximately 85 per cent of its Day 1 orders. Amazon, meanwhile, highlighted AI-enabled features such as Rufus, Lens AI and Review summaries to help customers discover and evaluate products.
However, AI’s contribution to incremental festive sales remains difficult to quantify. “Do we really know how much impact it has in the festive season? Frankly, nobody does,” says Vikas. AI-driven discovery may help consumers find products faster or choose unfamiliar brands, but it does not necessarily translate into additional spending. It could simply redirect purchases between competing products. As personal AI agents evolve, they may further reshape shopping and brand discovery. For now, AI is changing how retailers reach consumers more clearly than it is demonstrating how much additional festive demand it generates.
Will the Momentum Hold?
The months following Diwali will reveal whether festive spending signals sustained consumption growth or merely concentrates purchases around promotional periods. The evidence points neither to an across-the-board consumption boom nor to a uniform slowdown. Demand remains resilient in several segments, but its drivers vary: higher prices, more frequent purchases, premiumisation, financing and the shift towards online shopping all influence the numbers.
Initial discussions with channel and original-equipment-manufacturer partners point to confidence in festive demand, setting expectations for a strong second half, points out G Ramesh, Managing Director and CEO, HDB Financial Services. Bankers, however, offer a more nuanced picture. Canara Bank MD and CEO Brajesh Kumar Singh does not expect the recent repo-rate increase to materially affect festive spending. Ramesh Babu, MD and CEO of Karur Vysya Bank, is less optimistic, citing inflation, market conditions and uncertainty as reasons consumers are becoming cautious. “My opinion is that people are lying low and are conservative in spending,” said Babu. He also noted that the usual festive surge in the bank’s Buy Now, Pay Later business had not materialised during Dussera. Volumes that typically rose from around Rs 600–700 crore to approximately Rs 1300 crore during the festive period had not shown the same jump.
The divergence highlights the limits of financing as a demand driver. EMIs and deferred-payment options can make purchases more manageable, but they cannot eliminate household budget pressures. Food, rent, education and other essential expenses continue to compete for disposable income. The question is not simply whether credit is available, but whether consumers are comfortable committing future earnings to purchases today.
For households such as Anirudh and Kaira’s, the final shopping basket depends on what remains after essential expenses. Across India’s retail economy, millions of families are making similar calculations.