Retail sales has been growing between 2-7% over the last ten months of FY25 for most organised retailers, data from business surveys conducted by the Retailers Association of India (RAI), an apex body of retailers, shows. Yet, there is hope that the domestic retail market, valued at Rs 82 trillion, according to the Boston Consulting Group (BCG), could see an uptick in FY26, led by income tax cuts announced in the budget this year.
While 70% of the Rs 1 lakh crore fiscal stimulus is expected to go into savings and investments, according to experts, the balance 30% will go into consumer spending, especially into discretionary categories.
At the Retail Leadership Summit in Mumbai on Thursday, top executives expressed optimism that the extra money would push consumers to make a few important purchases, which many had been postponing for some time now as uncertainty and inflation weighed on consumer sentiment.
“Anything that is going to put more money in the hands of the consumer is going to be good for consumption,” P Venkatesalu, managing director of Trent, said.
“The trends in demand and consumption are pointing to a rise in spending,” Kumar Rajagopalan, CEO, RAI, noted.
While overall retail sales had been moderate in FY25, certain categories, Rajagopalan said, were seeing double-digit growth in recent months. In January 2025, for instance, retail growth was led by food and grocery at 13%, while QSR and CDIT (consumer durables and IT) grew by 6%.
In December 2024, QSRs emerged as the fast-growing segment with a 10% surge. While apparels, sports goods and food grocery saw a 7% growth each. October-November 2024, meanwhile, saw a festive and wedding boost in categories such as apparels and jewellery.
“The Union Budget 2025’s income tax exemption limit of Rs 12 lakh will also provide much-needed relief to retailers after the slowdown the sector has seen,” Rajagopalan said.
Kulin Lalbhai, vice-chairman and executive director, Arvind, noted that there are divergent trends emerging in retail. “There are consumers seeking premium products and there are those seeking value products. Retailers will have to adapt to these changes and build the right model to stay competitive,” he said.
In its report on the retail market, released Thursday, BCG notes that the long-term outlook of India’s retail market remains positive, with increased spending expected in discretionary and experience-based categories. Affluent households are expected to triple by 2030, BCG said, creating significant opportunities in luxury retail, while the mass market will continue to dominate and support sector growth. So, retailers will need to strike a balance between offering premium products and ensuring value for money, the consultancy said.
Also, while Gen Z and millennials are a key consumer cohort, driving demand for products and services that align with their values and digital-first lifestyles, the 45+ age-group is expected to become the largest consumer segment in the next decade, leading to demand for products in preventive healthcare and wellness.