Consumption indicators also presented a mixed but largely resilient picture, led by a sharp rise in vehicle retail sales
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India’s private consumption remained a relatively steady pillar of economic activity in the first quarter of FY27, even as its share in real GDP declined.Private final consumption expenditure (PFCE), or the money spent on final consumption of goods and services, grew 7.1 per cent year-on-year (y-o-y) to ₹44.7-lakh crore in Q1, broadly maintaining the pace seen in the previous quarter. Overall real GDP growth, however, was stronger at 7.8 per cent, indicating that investment and external demand were doing much of the heavy lifting. Consumption indicators also presented a mixed but largely resilient picture, led by a sharp rise in vehicle retail sales.Steady consumptionIn the first quarter of FY26, the PFCE growth had come in at 6.76 per cent. But quarter-on-quarter, the growth has remained virtually unchanged. Meanwhile, consumption’s share of real GDP fell to 55 per cent from 56 per cent in the March quarter, and was also below the 55.3 per cent share recorded in the June 2025 quarter.The lower share does not necessarily signal a contraction in consumption; rather, it reflects faster growth in other components of GDP.GST rate rationalisation in September 2025 had genuine consumption benefits, noted Vivek Iyer, Partner at Grant Thornton Bharat. “Repo rate reduction of 125 basis points since February 2025 also raised the demand for personal loans and auto loans. Some of the reasons can also be attributed to income-tax relief and a favourable monsoon impacting rural wages.”Other personal loansA businessline analysis of sectoral deployment of bank credit by SCBs in the first quarter of FY27 reveals outstanding personal loans grew by ₹1.74-lakh crore. The credit growth was led by other personal loans, mostly made up of high-interest unsecured loans to meet consumption needs, which grew by 191.8 per cent in Q1 over the same quarter last year. Meanwhile, education loans increased by 7.6 per cent and loans against gold jewellery grew 6 per cent y-o-y.The net GST revenue excluding cess, also grew 7.1 per cent y-o-y to ₹5.40-lakh crore during the quarter.“All the three characteristics of today’s growth GDP print had the same underlying driver - shielding the consumer - whether it be government cutting GST/excise tax rates, raising subsidies, or corporates not passing through input cost increases,” said a report by HSBC Global Investment Research. “No surprise that real consumption growth was stron... The IP series further shows that consumer durables (proxy for urban demand) grew faster than non-durables (proxy for rural demand).”Mixed signalsHigh-frequency indicators suggest that household demand remained resilient during the quarter, although not uniformly across categories. All-India vehicle retail sales surged 18.4 per cent y-o-y, providing the strongest consumption signal in the dataset and pointing to robust demand for automobiles. However, domestic air passenger traffic grew at a modest 1.7 per cent, suggesting limited expansion in air travel.Fuel consumption offered a mixed picture. Petrol consumption increased 5.8 per cent, while high-speed diesel consumption rose 2.8 per cent. LPG consumption, however, fell sharply by 16.6 per cent, mostly explained by the almost complete blockade of the Strait of Hormuz.Looking ahead, “private consumption in the September quarter will read softer than it actually is. The base is unforgiving, with PFCE growing 8.15 per cent a year ago, and with Diwali falling in November, the festival spend that landed in September last year simply shifts into the December quarter,” said Iyer. “Further, rainfall has run 14 per cent below normal, and a rural-income squeeze surfaces with a lag in collection efficiency and two-wheeler delinquencies.”Published on September 9, 2026
