Consumption explosion in 2026! Your pocket is happy due to GST cut and low inflation, shopping is going to increase!

The coming year is going to be even more brilliant economically for India, because the strong momentum of consumption will continue in 2026. All this support will be provided by low inflation, long-term impact of reduction in Goods and Services Tax (GST) and relaxation in policy rates along with income tax. These are the factors that boosted demand in 2025, and will continue to inspire confidence in 2026 as well.

In an ET report, Sakshi Gupta, Principal Economist of HDFC Bank, said that looking at the recent trends, it seems that we are reaching a very strong position in terms of consumption momentum in 2026. This will create a solid base for further growth. According to Paras Jasrai, Associate Director of India Ratings and Research, the main reasons for consumption are low inflation and increase 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% in the same period last year.

There will be a surge in middle-income consumption

Aurodeep Nandi, India Economist and Executive Director of Nomura, said that low inflation will continue in 2026 also, which will boost the real income of households and profits of companies. This will increase shopping by middle-income people, although high growth will come from rich buyers.

Private consumption reached a three-quarter high of 7.9% in July-September, whereas it was 7% in the previous quarter. It stood at 7.5% in the first half of FY26. Rajni Sinha, Chief Economist, CareAge Ratings, expects the pace to remain good, but private consumption may fall to around 7.3% in H2FY26 and 7% in FY27. The reason is that last year’s high base effect is decreasing and demand slows down a bit after festivals.

Rural and urban consumption situation

Economists say that there is hope for salary growth and good harvest in rural areas, but the formal job market will have to be kept a close eye. Economist Yuvika Singhal of QuantEco Research said that I am more concerned about job creation and income, because these are critical for the momentum of urban consumption. Urban consumption also needs a big boost, from daily use items to premium products, which are currently performing well only in the premium segment.