India’s economy faces subdued demand and slowing sectoral growth, with challenges in exports, consumption, and income growth projected for FY26, according to Nuvama.

The report identifies four key factors—wealth effect, incomes, leverage, and fiscal transfers—influencing consumption cycles.

In FY25, these factors showed weakness, with slower household income growth and reduced consumption loan growth.

The outlook for rural and urban incomes is bleak for FY26, but fiscal transfers could support middle- and lower-income households.

Rural consumption may rise after a period of weakness, while urban consumption may slow further, especially at the upper end.

State and central governments’ increased social sector spending could boost rural consumption.

India’s real GDP growth slowed from 8.2% in FY24 to 6% in FY25, reflecting weaker aggregate demand.

Corporate growth has slowed, and tax contributions from large businesses have dropped.

The Indian economy is supply-ready but faces demand challenges due to weak exports and constrained corporate spending.

Fiscal measures to support consumption and recalibrate growth strategies may be crucial for future economic momentum.

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