MUMBAI: India’s consumer demand is showing clear signs of softening, with inflation pressures amid volatile crude oil prices and a weak monsoon outlook beginning to weigh on spending across categories. While the slowdown is not uniform, the underlying direction is increasingly evident in sentiment and early consumption data from the March quarter (Q4FY26).
The weakness is most visible in a widening split across income groups. Lower-income households are cutting back under pressure from essentials inflation, while higher-income consumers are turning more cautious on expectations despite stable current incomes—together pointing to a broad-based but uneven cooling in demand.
A split consumer
Data from the Centre for Monitoring Indian Economy (CMIE) shows the Index of Consumer Sentiments (ICS) edged down 0.2% in March, snapping February’s 2.6% gain. While the headline change appears marginal, underlying trends show a widening divergence across income cohorts.
Lower-income households—earning under ₹1 lakh annually—saw a sharp deterioration in conditions. Their Index of Current Economic Conditions fell 15% in March, nearly reversing a 20% rise in February. Economists attribute this to the ₹60 hike in liquefied petroleum gas (LPG) cylinders, following high fuel costs amid the conflict in West Asia, which squeezed the budgets of India’s most vulnerable consumers.
“When the cost of daily sustenance spikes and access to essentials like LPG becomes uncertain, the overall sentiment tends to turn negative,” said Madan Sabnavis, chief economist at Bank of Baroda.
At the other end of the spectrum, sentiment is softening on expectations rather than current income stress. Affluent households, with annual earnings of at least ₹10 lakh, reported a 6% decline in the Index of Consumer Expectations, marking a third consecutive month of moderation. Only 40% now expect business conditions to improve over the next year, down from 52% in February.
This is the lowest level of optimism since the twin shocks of stubborn inflation and El Niño in 2024.
“Anxiety around job security, stagnant hiring, and the threat of 'imported' inflation are weighing on affluent minds,” Sabnavis said. “Since their real incomes remain largely intact, the pullback in their sentiment appears precautionary rather than a response to immediate financial stress.”
Nearly 11% of affluent households now expect conditions to worsen, marking the highest negative reading in 18 months, according to Mint’s analysis of CMIE data.
Spending shifts
The divergence in sentiment is also visible in spending behaviour, where households are increasingly prioritizing essentials and substitutes over discretionary purchases.
Big-ticket durables saw a pause in intent, with fewer households viewing March as a favourable time to buy consumer durables compared with February, CMIE data showed. Yet within categories, demand shifted toward lower-ticket substitutes. Sales of small kitchen appliances such as induction cookers, ovens and kettles surged as households adjusted to last month’s LPG constraints.
“A lot of non-urban households were first-time buyers of induction cookers and electric kettles. With penetration still low in these regions, growth spiked off a low base,” said Harshit Bora, head of analytics at retail intelligence platform Bizom.
Consequently, consumer durables sales in the March quarter of FY26 rose nearly 11% year-on-year, up from 7% last fiscal, according to Bizom. Growth was driven by non-urban markets, where sales jumped 15%, compared with 5% in urban areas.
However, Bizom flagged the risk that this momentum may not sustain. “Households deferred big-ticket purchases such as televisions and air conditioners to fund these smaller essentials,” Bora said.
Kotak Institutional Equities said it remains cautious on the sector after the March quarter, flagging a shift toward pricing-led growth as volumes stall across categories. With input costs rising, the rupee weakening, and demand softening in high-penetration segments such as fans and wires, the brokerage expects earnings resilience rather than expansion in the near term.
FMCG slowdown
The fast moving consumer goods (FMCG) sector also showed signs of cooling momentum in the March quarter, with sales growth slowing sharply across categories.
Overall growth fell to about 4% in Q4FY26 from 12% a year earlier, according to Bizom, as consumers cut back on discretionary spending in home care, personal care, and confectionery.
Bizom noted part of the slowdown reflects a high base, as demand in early 2025 had benefited from elevated government spending. With that support absent this year, underlying demand appears weaker.
Unseasonal rains in March also disrupted beverage consumption, Bora said.
The pullback was broad-based: urban growth slowed to 1% from 10% a year earlier, while rural growth moderated to 5% from 14%.
Adding to the outlook concerns, the India Meteorological Department’s forecast of below-normal rainfall at 92% of the long-period average raises the risk of an El Niño-linked hit to rural demand in FY27.
Costs and margins
At a time when demand is already uneven, consumer-facing companies are also facing pressure from rising input costs.
Most FMCG companies expect cost pressures to rise in the coming quarters, driven by a sharp surge in crude oil prices in March, said Preeyam Tolia, FMCG and retail analyst at Choice Institutional Equities.
“If crude oil prices remain elevated at $90-95 per barrel, we expect companies to undertake mid to high single digit price hikes to mitigate input cost pressures,” Tolia added.
However, passing on costs remains difficult in a weak demand environment.
“So, for sure, for a quarter or two, there will be pressure on margins for consumer durables and related companies,” said Kuunal Shah, fund manager at Carnelian Asset Management & Advisors.
In the near term, Tolia remains cautious on domestic consumption, noting that rising raw material prices and a weak monsoon outlook are likely to weigh on both volumes and margins.