India's Consumer Pulse: Navigating demand shifts in Q3-FY2024-25
26 February 2025, Mumbai
The Indian consumer revealed a nuanced picture in the third quarter of the 2024-25 fiscal. While there are pockets of robust growth, a deeper examination reveals factors tempering overall demand, particularly within the fashion and apparel sector.
Economic currents and consumer spending
Despite its resilience India’s economy is passing through a complex phase. Reports indicate continuation of GDP growth, yet this progress is being modulated by global economic pressures and domestic inflation. The crucial rural economy, a significant driver of national consumption, is showing signs of recovery, a positive indicator. However, the shadow of inflation continues to weigh on consumer behavior, particularly impacting discretionary spending. This creates a scenario where essential goods maintain steady demand, while purchasing of non-essential items, such as apparels are inconsistent.
Fashion's fragmented fortunes
Within the realm of Indian fashion, both premium and value segments are witnessing growth, albeit at differing paces. Consumer preferences are evolving with factors like festive seasons, promotional campaigns, and the ever-present allure of digital platforms having an influence. The menswear sector reflects this duality, with a growing appetite for both meticulously crafted formal wear and stylish casual attire.
Brand consciousness boosts premium segment, while the value segment thrives on accessible, trend-driven fashion. Womenswear, with its diverse styles, sees good demand for ethnic wear, contemporary western apparel, and innovative fusion designs, with online retail playing an important role. The growing kids wear market driven by parents prioritizing comfort and style, is also influenced by online platforms and specialized brands.
The undercurrents of subdued demand
Despite growth, certain factors are contributing to a moderation in consumer demand. A primary concern is inflation, which constrains discretionary spending as households prioritize essential goods. Urban consumption is also showing signs of moderation, possibly due to fluctuating employment opportunities and lingering economic uncertainties. Also, the ripple effects of global economic headwinds can impact consumer sentiment, leading to more cautious spending. While rural demand is recovering, its progress is uneven, creating regional variations in consumption. Finally, rising input costs are pushing many brands to increase retail prices, which in turn lowers consumer demand.
The Q4 outlook
As India enters the final quarter of the fiscal year, several factors will shape consumer demand. Historically, Q4 sees increased spending due to the end of the fiscal year, and also remaining festival spending. If inflation can be contained, and rural market growth continues, there is potential for higher consumer spending. Government policies aimed at stimulating the economy will also play a crucial role. RBI’s close monitoring of inflation is essential, as its control will boost consumer spending. The continued expansion of digital commerce will also be a major influence on sales. In essence, while challenges remain, the Indian consumer market retains its dynamism. Businesses that can adapt to evolving preferences, navigate economic uncertainties, and leverage digital platforms will be best positioned for success.
