India’s consumer market, long considered the powerhouse of its economic growth, is now facing visible pressure. With private consumption making up nearly 60% of the country’s $4 trillion GDP, any slowdown in spending has direct implications for the economy’s momentum. 

One major challenge is inflation. Food inflation spiked to nearly 11% in late 2024, lifting retail inflation to a 14-month high of 6.2%. Yet wages grew by less than 2% in real terms, well below historical averages. This mismatch has squeezed household budgets and dampened consumer confidence. A Citibank index showed urban consumption at a two-year low by the end of 2024. Families are cutting back on discretionary spending, trading branded items for cheaper substitutes, and even fast-food chains report customers shifting to smaller, budget meals. 

The divide between rich and poor is becoming starker. Lower-income households and rural buyers, who make up about 70% of India’s population but only around a third of FMCG sales, have reduced spending significantly. Rural FMCG volumes fell 6–10% through much of 2022 and remain fragile, despite some recovery in 2023. Hindustan Unilever’s leadership has acknowledged that rural demand is yet to fully bounce back after years of high inflation. Meanwhile, affluent urban Indians continue to spend freely on premium goods, deepening the consumption gap. 

Sectoral trends highlight these contrasts. Hindustan Unilever’s March-quarter profits fell 5.7% as volume growth stalled, pushing the company to lower product prices and increase package sizes to attract buyers. In automobiles, sales of small cars and two-wheelers slumped, while SUV sales surged nearly 19% year-on-year in early 2024. Maruti Suzuki’s cheapest models saw double-digit declines, even as demand for SUVs soared. In contrast, the housing market is booming, with 2024 expected to record over 300,000 home sales in major cities, largely in premium categories. 

Policymakers are responding. The Reserve Bank of India cut interest rates by 100 basis points in 2025 as inflation cooled to about 2%, aiming to boost demand. The government has also proposed tax and GST cuts, such as reducing levies on small cars, to make goods more affordable. Companies, too, are adapting by launching smaller, low-priced packs for rural markets and premium lines for cities. 

Experts believe the sustainability of India’s consumer boom depends on restoring household purchasing power. Stronger wage growth, stable inflation, and supportive policies will be critical for ensuring that India’s vast consumer base can once again drive inclusive and robust economic growth.