The festive season has always been an important period for shopping and consumption in India. Demand typically rises across categories such as clothing, electronics, jewellery, household goods and travel. However, this year, urban consumers appear to be changing the way they shop.
With inflation putting pressure on household budgets, borrowing costs remaining a concern and uncertainty over future expenses, families are becoming more cautious about non-essential purchases. Rather than stopping their shopping altogether, consumers are prioritising their budgets, focusing on their needs and looking for better value for money.
Let us look at the changing consumption trends this festive season and understand what they could mean for the retail sector, companies and investors.
What’s Happening?
According to a LocalCircles survey, urban Indian families could spend an average of nearly Rs 20,000 on non-essential purchases this festive season. Total festive spending in 2026 is estimated to decline by approximately 6% to Rs 1.97 lakh crore, compared with Rs 2.10 lakh crore in 2025 and Rs 1.85 lakh crore in 2024.
The survey is based on more than 67,000 responses from 307 districts across the country. Of the respondents, 57% of urban families said they planned to shop, while 31% did not intend to make any additional purchases. Nearly 18% of families planned to spend less than Rs 10,000, 15% planned to spend between Rs 10,001 and Rs 25,000, and 9% had a budget of Rs 25,001 to Rs 50,000. Meanwhile, 6% had set aside Rs 50,001 to Rs 1 lakh, while 9% planned to spend more than Rs 1 lakh.
These figures suggest that festive demand has not disappeared. Instead, consumers are becoming more selective about where and how they spend their money.
Pressure from Inflation and Rising Interest Rates
One of the key reasons for the expected decline in festive spending is the growing pressure on household budgets. In September 2026, retail inflation rose from 4.83% in August to 5.54%, while food inflation increased from 5.97% to 7.74%. In addition, the RBI raised the repo rate by 25 basis points to 5.50% on 7 October, increasing the possibility of higher borrowing costs. For example, on a Rs 50 lakh home loan with a 25-year tenure, if the full rate hike is passed on to the borrower, the EMI could increase by approximately Rs 817 per month.
The RBI has also raised its inflation estimate for financial year 2026–27 from 5% to 5.2% and indicated that inflation could reach 6% in the October–December quarter. Meanwhile, household financial liabilities had reached 45.8% of GDP by March 2026. With a larger share of household income going towards essential expenses and debt repayments, families have less room in their budgets for additional purchases.
The Changed Shopping Trend
Clothing, footwear and accessories remain the most popular categories during the festive season. According to the survey, 72% of families planning to shop intend to spend on these items. Meanwhile, 45% plan to spend on home appliances and furniture, and an equal share on travel. Around 39% of families also plan to spend on food and gifts.
Only 22% of families plan to buy mobile phones and electronic gadgets, while an equal share intend to spend on home renovation. Just 10% plan to purchase automobiles and 6% jewellery. Another important finding is that 83% of families could use some portion of their savings for festive shopping. Approximately 34% plan to fund at least one-fourth of their festive budget through savings, while 16% intend to make all their purchases using savings.
A separate YouGov survey found that 26% of consumers want to shop smart while sticking to their usual budgets, while 23% plan to cut back on non-essential purchases.
What Does This Mean for Investors?
The expected slowdown in festive spending presents a mixed picture for companies in the retail, consumer electronics, jewellery and automobile sectors.
While consumers are becoming more cautious about spending, online sales are expected to remain strong. According to Datum Intelligence, online festive sales could rise from Rs 1.20 lakh crore in 2025 to Rs 1.50–1.55 lakh crore in 2026.
The automobile sector is also showing strength. In September, vehicle registrations rose 31.82% to a record 25.37 lakh units. However, demand for expensive jewellery appears to be under pressure. During Ganesh Chaturthi, gold sales volumes declined by approximately 15%.
For investors, it will be important to track companies’ sales volumes, profit margins, discounting strategies and consumer demand. Higher sales do not necessarily translate into a similar increase in profits, particularly when companies offer steep discounts to attract buyers.
What’s Next?
Going forward, the outlook for India’s consumption market will depend on inflation, interest rates, household incomes and consumer confidence. The RBI has raised its GDP growth estimate for FY27 from 6.7% to 7.1%, but consumers continue to exercise caution when it comes to spending.
In the YouGov survey, only 14% of consumers said they planned to spend more than they did last year. Meanwhile, 49% considered product quality important when shopping, while 42% prioritised price or discounts.
This suggests that companies may need to focus more on product quality, affordable pricing and changing customer needs rather than relying solely on festive offers. Businesses that adapt to these priorities could be better positioned to respond to shifts in consumer demand.
Disclaimer: This article is for educational and informational purposes only and does not constitute investment advice or a recommendation to buy or sell any securities. The companies mentioned are cited as examples within the context of market developments. Investors are advised to conduct their own due diligence and consult their financial advisor before making any investment decisions.
Investments in the securities market are subject to market risks. Read all related documents carefully before investing.
