Retail Gains Steam This Festive Quarter, Awaits Defining Test in 2025

Retail in India has always mirrored the pulse of the economy and the mood of its people. In July 2025, the sector recorded an 8% year-on-year growth in sales, the third consecutive month of steady 7-8% expansion. This recovery, coming after a sluggish start to the year, shows that consumers are gradually reopening their wallets for discretionary purchases. It also sets the stage for the months ahead, when weddings and festivals drive not only transactions but also sentiment.

Why the Festive Quarter Matters

The festive quarter has historically served as the barometer of consumer sentiment in India. In 2024, retail sales rose 7% during October-November, only to slow to 5% in December. Categories such as food and grocery, QSRs, jewellery, and consumer durables performed well, while automobiles and white goods lagged as buyers deferred purchases in anticipation of tax changes. This mix reflects how celebrations can inspire spending, but inflation and EMI burdens often temper enthusiasm.

Festivals in India are rooted in emotion. A new sari at Diwali, gold at weddings, or gadgets as gifts – these are purchases that go beyond utility. They are symbolic, tied to tradition, memory, and community. Yet sentiment alone cannot sustain growth; it must be reinforced by confidence in economic stability. Last year, December’s dip was a reminder that when households feel financial stress, sentimentality makes way for caution.

Signals of Faster Growth

This year, the picture looks brighter. Consistent 7-8% growth in May, June, and July 2025 points to a broad-based revival. RAI’s recent business survey reveals uniform growth across regions, with East, West, and South India each at 8%, and the North close behind at 7%. This balance is significant: it suggests the recovery is not skewed by geography but shared across the country.

Category trends offer further insight. Quick-service restaurants recorded double-digit growth in July, reflecting a shift towards out-of-home consumption. Discretionary segments such as apparel, jewellery, sporting goods, and furniture grew around 9%, while consumer durables and IT products rose 6%. Even segments such as footwear and beauty & wellness at 5% growth show that consumers are gradually rebuilding discretionary spending habits.

These numbers reflect a sector on the mend, but also one that is mindful of external risks, from global uncertainty to domestic inflation.

The GST Reforms and Their Impact

A major factor shaping retail in 2025 is the recent reform of the Goods and Services Tax (GST). The move towards a simpler two-slab structure and the removal of inverted duty in textiles mark important steps toward clarity and fairness. Lower rates for essentials, food, and several consumer products provide a boost to household budgets just as festive shopping begins. For textiles, rationalising duties ensures a smoother supply chain in a sector central to festivals and weddings.

At RAI, we view these changes as broadly positive, but not without caveats. The decision to tax garments and footwear priced above INR 2,500 at 18% risks discouraging middle-class buyers of wedding attire and premium apparel. Similarly, mobile phones, now essential for both communication and commerce, remain in the 18% slab. Reducing this would have aligned taxation with the digital realities of today’s India. Finally, commercial rentals, still taxed at 18%, continue to weigh heavily on small and medium retailers, many of whom operate with thin margins. Addressing this would directly improve the viability of physical stores, which remain central to India’s retail fabric.

Balancing Optimism with Caution

As we move into the festive months, retailers are cautiously optimistic. Growth over the past quarter suggests a stronger foundation than last year. GST reforms, though imperfect, add momentum by making consumption more affordable in several categories. And above all, the enduring sentimentality of Indian shoppers - the desire to celebrate with family, to invest in tradition, to mark milestones – will drive demand.

Yet optimism must be balanced with prudence. Global headwinds, inflationary pressures, or a dip in consumer confidence can quickly shift the picture. For retailers, the task is to stay agile: to align assortments with consumer priorities, to manage inventories carefully, and to ensure that value remains at the heart of every transaction.

Retail is both an economic driver and a reflection of India’s social fabric. The festive season ahead will test whether the recent recovery has depth and whether sentiment can convert into sustained spending. If momentum holds, 2025 could mark a turning point in retail’s post-pandemic journey where reforms and sentiment combine to fuel growth.

For now, the mood is one of cautious optimism. And in retail, as in life, optimism often makes the difference between holding back and moving forward.