New Delhi [India], October 14: With Navratri, Dussehra and Diwali approaching, India’s festive season, traditionally the biggest window for discretionary purchases, is opening against a tightening economic backdrop. Retail inflation, as measured by the Consumer Price Index (CPI), rose to 5.54% in September 2026 from 4.83% in August, its eleventh consecutive monthly increase, according to data released by the Ministry of Statistics and Programme Implementation (MoSPI) on October 12. Food inflation surged to 7.74% from 5.97%, with onion prices more than doubling year-on-year, and a home-cooked vegetarian thali cost about 10% more than a year earlier. On October 7, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) raised the repo rate by 25 basis points to 5.50%, its first hike in over three and a half years, and shifted its stance to calibrated tightening. Governor Sanjay Malhotra said rate cuts are off the table in the near term. The RBI raised its FY27 CPI inflation projection to 5.2% from 5.0%, and expects inflation to peak at 6.0% in the October-December quarter, which coincides with the festive season.
• In total, 57% urban Indian households surveyed likely to spend this festive season.
• 34% of households spending likely to fund a significant part (25% or more) of festive spending from Savings.
• 72% of households spending likely to buy clothing/fashion products; 45% also buying appliances.
• 9% households likely to spend over INR 1 lakh this festive season; 30% between INR 10,000 and 1 lakh.
The RBI has flagged that price pressures are becoming broad-based, with 37% of items in the CPI basket rising more than 4% by August, and that cyclical inflation risks are no longer benign given elevated oil prices, tighter global conditions and a deficient monsoon. Brent crude was trading at about USD 101 per barrel on October 6, over 50% higher than a year ago, and wholesale inflation, as measured by the Wholesale Price Index (WPI), jumped to 11.39% in September from 9.92% in August on higher fuel and manufacturing costs, according to government data released on October 14. The hike will also make festive borrowing costlier: if passed on in full, the EMI on an INR 50 lakh, 25-year home loan rises by about INR 817 a month.
While the RBI raised its FY27 GDP growth projection to 7.1% from 6.7%, citing resilient private consumption, its household surveys point to growing caution. In the July 2026 round of the Urban Consumer Confidence Survey, the Current Situation Index fell to 88.3 from 90.7 and the Future Expectations Index to 115.3 from 118.7. The net response on current spending on non-essential items stood at just 3.3, against 86.7 for essential items, while the employment net response fell to -21.9 from -14.4. Households also expect prices to rise 9.4% over the next year, according to the RBI’s Inflation Expectations Survey of Households. These expectations carry weight: RBI working papers by Purnima Shaw and RK Sinha find that since the pandemic, household inflation forecasts have been more accurate than professional forecasts about 65% of the time, against 39% for professional forecasts.
Household balance sheets are also under strain. While net household financial savings improved to 7% of Gross National Disposable Income (GNDI) in FY25 from 5.8% in FY24, largely due to lower borrowings, an Economic and Political Weekly analysis published in early September notes that household financial liabilities reached 45.8% of GDP by March 2026, having grown faster than financial assets since mid-2022. New fixed deposits offered 5.67% in August, below the 9.4% inflation households expect, implying negative real returns, yet the share of term deposits in total bank deposits rose from about 55% to nearly 62% between March 2022 and March 2026.
Early festive indicators point to spending that is selective. Gross GST collections rose 14.7% year-on year to INR 2.04 lakh crore in September 2026, though domestic GST grew a more modest 10.1%. Vehicle retail sales hit a record 25.37 lakh units in September, up 31.8% year-on-year, though the Federation of Automobile Dealers Associations (FADA) cautioned that growth was flattered by a low base, as buyers had deferred purchases ahead of GST 2.0 in September 2025.
Online festive sales, which opened with Amazon’s Great Indian Festival on October 8 and Flipkart’s Big Billion Days on October 9, show a similar split. Platforms have reported strong traffic, with Flipkart recording 6.3 million concurrent users and about 60% of demand from non-metro customers, and Meesho reporting a 75% year-onyear rise in Day 1 orders across fashion, beauty and festive décor. Big-ticket electronics, however, are under pressure: Counterpoint Research expects festive smartphone volumes to fall 12% year-on-year as rising memory chip costs push up device prices, even as market value rises 5%. Unlike last year, when GST rate cuts effective September 22, 2025 coincided with the start of major sales, there is no tax-led tailwind this season.
Against this backdrop, LocalCircles conducted its Mood of the Consumer survey to understand how much urban Indian households plan to spend this festive season, what they intend to buy and how they plan to fund it. The survey received over 67,000 responses from urban household consumers located across 307 districts of India.
The survey indicates that urban Indian households are likely to spend INR 20,000 on average on discretionary purchases this festive season. Based on the spending levels indicated in the survey, LocalCircles estimates total urban household festive spending at INR 1.97 lakh crore in 2026, 6% lower than INR 2.10 lakh crore in 2025. This reverses last year’s rise from INR 1.85 lakh crore in 2024, a year in which the GST rate cuts effective September 22, 2025 coincided with the start of the festive season. While 57% of households surveyed are likely to spend this festive season, 31% plan no discretionary spending at all. Of those spending, 72% will buy clothing/fashion products, and 83% will dip into savings to some extent, including 34% who will fund 25% or more of their festive spending from savings. The key findings are detailed below.
57% of urban Indian households surveyed likely to spend this festive season; 9% likely to spend over INR 1 lakh and 30% between INR 10,000 and 1 lakh
To gauge festive spending plans, the survey asked urban households, “During the upcoming festive season (September-November 2026), approximately how much does your household expect to spend on discretionary purchases (excluding regular monthly expenses like groceries, utilities, rent/EMIs, school fees, etc.)?” This question received 22,904 responses. In response, 31% said no discretionary spending is planned, while 18% expect to spend less than INR 10,000 and 15% between INR 10,001 and INR 25,000. Another 9% expect to spend INR 25,001-50,000, 6% INR 50,001-1 lakh and 9% INR 1-10 lakh, while 12% could not say.
In aggregate, 57% of urban households surveyed are likely to spend this festive season. 30% expect to spend between INR 10,000 and INR 1 lakh and 9% over INR 1 lakh, while 18% will keep their festive budget below INR 10,000. With nearly 1 in 3 households planning no discretionary spending at all, the findings mirror the caution visible in the RBI’s latest urban consumer confidence survey, where the net response on current spending on non-essential items stood at just 3.3.
Urban Indian households likely to spend INR 20,000 on average this festive season; total urban festive spending estimated at INR 1.97 lakh crore, 6% lower than 2025
Based on the discretionary spending levels indicated by households in the survey, LocalCircles estimates that urban Indian households are likely to spend INR 20,000 on average this festive season, and that total urban household festive spending will fall to INR 1.97 lakh crore in 2026 from INR 2.10 lakh crore in 2025, a decline of 6%. Festive spending had risen about 14% in 2025 from INR 1.85 lakh crore in 2024, as the GST 2.0 rate cuts effective September 22, 2025 coincided with the start of the festive season. This year, with no such tax-led tailwind, retail inflation at 5.54%, food inflation at 7.74% and the RBI’s October 7 rate hike making credit costlier, households are scaling back, although spending remains about INR 12,000 crore above 2024 levels. The pullback is most visible in big-ticket categories, with Counterpoint Research projecting a 12% year-on-year fall in festive smartphone volumes as device prices rise.
72% of urban Indian households spending this festive season likely to buy clothing/fashion products; 45% also buying home appliances & furniture
The survey next asked households, “What are all the discretionary purchases that your household plans to make during the upcoming festive season?” This question received 20,916 responses, with respondents able to select more than one option. In response, 72% said clothing, footwear & accessories, making it the clear top category, followed by 45% each for home appliances & furniture and travel & holidays. 39% plan to spend on gourmet foods & gifting, 22% each on mobile phones, consumer electronics & gadgets and on home renovation/interiors, and 10% on an automobile/two-wheeler. Only 6% plan to buy jewellery, while 10% listed other categories.
The low share for jewellery comes as domestic gold prices rose 12% in August to about INR 1.59 lakh per 10 grams, with the World Gold Council noting that sharp price swings are keeping jewellery buyers cautious ahead of the festive season. CPI data for August also show silver jewellery prices up over 107% year-on-year. Prices remain elevated going into Dhanteras and Diwali, with gold trading at about INR 1.50 lakh per 10 grams and silver at about INR 2.26 lakh per kg on MCX on October 7.
Early online sales mirror this, with Meesho reporting a 75% year-on-year rise in Day 1 orders across fashion, beauty and festive décor, while pricier smartphones weighed on electronics.
34% of urban Indian households spending this festive season likely to fund a significant part (25% or more) of it from savings; 83% to dip into savings to some extent
To understand how festive purchases will be funded, the survey asked households, “If your household plans discretionary spending this festive season, what proportion do you expect to fund from savings?” This question received 23,451 responses. In response, 17% said none, as spending will come entirely from earnings, while 49% expect to fund less than 25% from savings and 18% between 25% and 50%. No respondent chose 51-75% or more than 75%, while 16% said their spending will be funded entirely from savings. None indicated that borrowing would be required.
In aggregate, 83% of urban households planning festive spending expect to dip into savings, and 34% expect to fund a significant amount, 25% or more, from savings, including 16% who will rely on savings entirely. With retail inflation already at 5.54% in September, the RBI projecting it to peak at 6.0% in the October-December quarter and its October 7 rate hike making credit costlier, drawing on savings appears to be how many households plan to protect festive spending from pressure on monthly budgets.
In Summary
The LocalCircles Mood of the Consumer survey indicates that urban India’s festive season will be more subdued than last year. Urban Indian households are likely to spend INR 20,000 on average, and LocalCircles estimates total urban household festive spending at INR 1.97 lakh crore in 2026, 6% lower than INR 2.10 lakh crore in 2025, when GST rate cuts coincided with the festive season, though still above INR 1.85 lakh crore in 2024. While 57% of urban households surveyed plan discretionary purchases, 31% plan none, and budgets are largely modest: 30% expect to spend between INR 10,000 and INR 1 lakh and only 9% over INR 1 lakh. Spending is concentrated on clothing/fashion products, which 72% of those spending plan to buy, followed by home appliances & furniture and travel & holidays at 45% each, while jewellery purchases are limited to 6% amid elevated gold and silver prices.
The findings on funding are the most significant. 83% of households planning festive spending will dip into savings, and 34% will fund 25% or more of it from savings, including 16% who will rely on savings entirely. In other words, for many urban households this festive season is being paid for out of past savings rather than current income. This corroborates the RBI’s finding of resilient spending intentions despite weakening sentiment on the economy and jobs. With the RBI’s October 7 rate hike raising borrowing costs and rate cuts ruled out in the near term, savings, not credit, will be the cushion.
That cushion is thinning. Retail inflation has risen for eleven consecutive months to 5.54% in September, wholesale inflation has crossed 11%, food inflation is at 7.74% and crude oil remains above USD 100 per barrel, while household liabilities have been growing faster than financial assets. With wholesale prices rising at more than twice the pace of retail prices, more of that pressure could reach store shelves in the coming months, just as the RBI expects CPI inflation to peak at 6.0% in the October-December quarter. Households drawing down savings now may have less of a buffer for the wedding season and the expenses that follow into 2027. Urban India will light its diyas this Diwali as it always does; the difference this year is how much of the oil is being drawn from household savings.
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