Festive Season Market Outlook: Consumption & GST Boost

India is entering its busiest and most lucrative consumption cycle, the festive season. After the Pitru Paksha period where large parts of India express gratitude to their ancestors and refrain from consumption, we see a consumption boom start  from Navratri to Diwali. This is followed by Christmas and New Year and the overall period historically accounts for a sharp uptick in discretionary spending across categories. Many seasonal spends, annual events, weddings etc also pick up in this period. 

Therefore companies gear up for higher sales of various items spanning consumer durables and automobiles to FMCG and apparel. This year, the festive buildup coincides with two structural tailwinds, moderating inflation which leaves  more disposable income in the hands of households, and an indirect tax reduction through the Goods and Services Tax (GST) rationalization. Let us not forget the significant direct tax reduction and slab reforms announced in the budget earlier this year which leaves more money in the hands of the households. 

Consumption during Festivals

In India, the festive calendar contributes significantly to consumption-led GDP growth. Historically, consumer goods companies register anywhere between 25-30% of their annual sales in this three-month period, a figure that translates into upwards of ₹4 trillion in retail trade at a national scale. Sectors like automobiles, consumer electronics, and home appliances often report up to 35-40% sales surges in festive quarters, supported by no-cost EMI options and heavy promotional discounts. FMCG categories like packaged foods, beverages, and personal care record sustained demand on the back of gifting and stocking-up behavior. The e-commerce sectors also thrive, with digital sales now touching record highs due to omni-channel adoption.

Urban consumption is boosted by wage hikes, especially after the 7th Pay Commission increments for government employees, and stronger credit growth which is estimated at 16% year-on-year for retail loans this festive quarter. Housing-related consumption is also expected to expand by over 12%, with urban real estate registrations hitting multi-year highs in October. 

Rural demand rebounded after improved monsoon rainfall led to a 4% higher kharif sowing acreage, stabilizing incomes and supporting a 5% increase in rural FMCG volumes. With input cost inflation moderating (down nearly 3% in Q3 2025 for food and energy), consumer companies are expected to limit further price hikes, helping sustain broader volume-driven expansion.

How GST rate cuts can augment consumption 

GST rate cuts have significantly boosted consumption and affordability in India’s retail landscape, especially across mass-market sectors. Since 2023, the GST Council has reduced rates on segments like footwear (down from 18% to 12%), small two-wheelers (from 28% to 18%), packaged foods (many items down from 12% to 5%), and air conditioners (reduced from 28% to 18% for select models). These adjustments have directly lowered product costs and improved retail demand, mainly during the festive season.

By reducing the tax incidence on mass-consumption goods, GST has spurred both supply-side efficiencies and demand-side affordability. For instance, the gradual lowering of GSTon essential footwear and lower-value textile products is creating headroom for sharper retail penetration in rural and semi-urban towns. On the higher ticket side, the stability in taxation for white goods and automobiles ensures that consumers benefit more from festive discounts and dealer incentives than from tax volatility.

Sectoral Beneficiaries

Several sectors stand out as potential winners this festive year.

Automobiles: The industry is already witnessing double-digit growth in passenger vehicles. Demand for SUVs, motorcycles, and entry-level compact cars is expected to peak as financing becomes cheaper and customer schemes intensify. GST rate stability adds further clarity for consumers planning large-ticket purchases.

Consumer Durables & Electronics: Lower GST rates and aggressive festive promotions by companies such as Samsung, and Voltas are expected to drive sharp sales upticks. With replacement demand and urban aspirations rising, this segment could outperform.

Retail & E-commerce: Online platforms such as Flipkart and Amazon have consistently recorded double-digit growth during festive sales. GST compliance has also formalized smaller sellers, allowing them to benefit directly from online retail channels. Offline formats, particularly malls and organized retail, are set to benefit as footfalls return to pre-pandemic levels.

Hospitality & Travel: Festive holidays coincide with peak travel season. Hotels, airlines, and restaurants are prepared for record demand. GST moderation on categories like restaurants enhances affordability for the mid-income segment.

Market Sentiment and Equities

Stock markets typically anticipate festive sales with strong positioning in consumer discretionary and retail-related counters. Historically, indices like the Nifty Consumption Index or Auto Index have outperformed the benchmark during strong festive cycles. This year, investors are closely watching volume and margin expansion signals. As price hikes fade and volume-led growth returns, companies may guide toward stronger FY26 earnings.

Retail investors also tend to increase trading activity during festivals, as sentiment runs high around new purchases (aided by religious beliefs such as Dhanteras). 

Outlook

To sum up, the combination of restored purchasing power, GST-driven affordability, improved rural prospects, and government-led infrastructure spending provides the perfect setting for a buoyant festive season. Consumption is likely to remain the dominant theme driving corporate growth and equity sentiment in Q3FY26. With inflation subdued at around 2%, wage growth rising, and GST easing the tax burden on households and businesses, India’s festive economy looks well-positioned to deliver one of the strongest seasons in recent period.