As the calendar turns to 2026, expectations across industry, markets and policy circles are anchored around a firmer growth cycle, supported by reform momentum, tax relief and easing inflation, even as global uncertainties and base effects continue to temper projections.
Consumption Catalyst
At the industry level, the tone is one of guarded optimism. RC Bhargava, chairman of Maruti Suzuki India, said that the macro environment is becoming more supportive after a cautious phase, with reforms beginning to show through in demand. In automobiles, the revival following GST rate cuts has stabilised volumes, though he underlined that clearer projections for the next fiscal would depend on how demand sustains through the January–March quarter and into the first quarter of the new year.
A similar inflection is visible in consumption-facing sectors. Mohit Malhotra, CEO of Dabur India, pointed to early but encouraging signs of a pickup across both rural and urban markets, helped by GST rationalisation, steady infrastructure spending and a normal monsoon. Rural consumption, in his assessment, is likely to improve gradually as inflation eases and household incomes normalise, aided by deeper distribution and wider village-level reach.
Beyond cyclical recovery, Malhotra also flagged a structural shift in consumer behaviour. Millennial-led households, according to him, are increasingly driving demand for health, wellness and purpose-led brands, accelerating premiumisation and favouring nature-based and Ayurveda-inspired products. Expectations from the Union Budget, he added, remain focused on measures that ease rural stress, raise disposable incomes and strengthen agriculture-linked supply chains.
Policy support for mass consumption remains a common theme across FMCG. Sudhir Sitapati, managing director and CEO of Godrej Consumer Products, highlighted the role of further GST rationalisation, particularly for large home care categories still taxed at 18%, in sustaining demand. With income tax relief and infrastructure spending already providing stimulus, he indicated that the demand outlook for 2026 appears supportive.
Retailers see consumption-led growth as having broader economic and fiscal spillovers. Kumar Rajagopalan, CEO of the Retailers Association of India, said that modern retail improves transparency, tax compliance and employment generation. In his view, sharper policy focus on retail as a long-term growth driver, including higher disposable incomes, faster rollout of a national retail policy and support for digital adoption among small retailers, could materially lift the sector’s contribution to GDP.
At the macro level, economists expect momentum to hold, though at a moderated pace. N R Bhanumurthy, director, Madras School of Economics, noted that income tax and GST cuts are likely to continue supporting aggregate demand into FY27, helping crowd in private investment. He also pointed to potential upside if trade frictions ease, particularly through a rollback of punitive tariffs in India–US trade.
Strategic Pivots
That optimism is tempered by base effects, according to D K Srivastava, chief policy adviser, EY. With growth in FY26 expected at over 7%, he has projected moderation to around 6.5% in 2026–27, still well above global growth. According to him, the post-Covid growth strategy, anchored in government capital expenditure and private consumption, will need to continue, with greater emphasis on the quality of capex directed towards new technology areas such as AI, data centres, space and defence.
Financial markets are also entering 2026 on firmer footing. Nilesh Shah, managing director of Kotak AMC, indicated that earnings growth is likely to rebound into double digits in FY27, while valuations have normalised from earlier peaks. With domestic liquidity from SIPs and institutional investors remaining strong, equity returns are expected to be driven more by earnings growth than valuation expansion.
Other asset managers echoed this view. S Naren, ED and CIO, ICICI Prudential AMC, pointed out that policy measures such as tax cuts, GST reductions and lower interest rates have strengthened the macro backdrop, while relative equity valuations have improved as global markets have outperformed. In this environment, he emphasised the importance of asset allocation discipline amid lingering global risks. A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC, also indicated that lower rates and GST cuts should support lending growth and consumer demand, strengthening corporate earnings and improving attractiveness for foreign investors in 2026.
From the credit side, lenders expect growth to remain healthy but more disciplined. Rajiv Sabharwal, managing director and CEO of Tata Capital, said that early signals point to sustained retail credit demand with sharper product and pricing segmentation. While borrowing conditions remain favourable, he flagged a preference for secured lending and tighter risk controls, aided by more frequent borrower data reporting and real-time risk identification.
Banks share a similar assessment. Rajiv Anand, managing director and CEO of IndusInd Bank, said the sector is shifting from consolidation to calibrated growth, with sharper focus on deposit mobilisation, risk-calibrated expansion and digital and AI-led transformation.
Taken together, these views suggest 2026 is shaping up as a year of steadier, more broad-based growth, driven by consumption recovery, policy support and improving financial conditions. However, execution challenges and external risks need to be factored in.