Key facts
- India's consumer and retail sector showed strong performance in the first half of FY26.
- GST cuts and a favorable base effect contributed to boosted consumption.
- Rising input costs from West Asia and monsoon uncertainty are identified as risks.
- The second quarter of FY26 is critical as low-cost inventory depletes.
- Rural demand sentiment is under pressure.
India's consumer and retail sector demonstrated robust performance during the first half of fiscal year 2026. This growth was supported by reductions in Goods and Services Tax (GST) and a favorable base effect that stimulated consumption. However, the outlook for the second quarter of FY26 presents significant challenges. BofA Securities has warned that rising input costs, particularly from West Asia, coupled with uncertainties surrounding the monsoon season, could create a commodity crunch. This critical juncture is exacerbated by the depletion of low-cost inventory, potentially impacting profitability. Furthermore, sentiment regarding rural demand is experiencing pressure, adding another layer of concern for the sector.