The key question now is whether this rebound marks the start of a sustained consumption upcycle, or a temporary lift driven by deferred demand and policy tailwinds.

That optimism is visible in the data. The Centre for Monitoring Indian Economy's Consumer Pyramids Household Survey (CPHS) shows a steady post-festive recovery in confidence. The Index of Consumer Sentiments (ICS) rose 2.4% in October and a further 2.2% in November. The index grew at an average 2% between June and August.

While both rural and urban India saw an improvement, the rebound is clearly city-led: urban sentiment surged, while rural gains were marginal. Income perceptions have also strengthened, with the share of urban households feeling financially better off year-on-year rising by 1.2 percentage points. Rural sentiment, however, cooled sharply, with the rural ICS rising just 0.6% in November after a stronger 5.8% increase in October.

What is fuelling this recovery? Experts attribute the turnaround to a mix of policy action and improving purchasing power.

A fall in prices following the rationalization of the goods and services tax (GST) rates has helped to boost consumption which has been witnessed across the board, said Madan Sabnavis, chief economist at Bank of Baroda. This surge in demand was anticipated, as many households had postponed purchases after the government announced impending reforms in August.

"This will hopefully be maintained through the rest of this fiscal," Sabnavis said. "The good harvest has added to income while the lower inflation induced by GST has enhanced purchasing power for sure."

In a sweeping set of reforms, the GST Council cut indirect GST rates on nearly 400 items from 22 September, shifting several household and mass-consumption items to lower tax slabs, primarily from 28% to 18% and from 18% to 12%. These included detergents, shampoos, packaged foods, kitchen appliances and air conditioners, translating into lower retail prices and stronger purchasing power.

Recent monetary easing has added further momentum. The 25-basis-point rate cut delivered by the Reserve Bank of India (RBI), combined with benign inflation, is expected to support discretionary spending.

Souymajit Ghosh, chief operating officer at Balancehero, a digital lending firm, believes the cut should incrementally boost consumption through cheaper personal loans and improved credit access. "With the RBI projecting FY26 growth at 7.3%, the policy stance is decidedly growth-supportive."

Hard data backs the sentiment

Crucially, the revival doesn't seem just sentiment driven. Hard economic indicators between September and November point to a broader-based revival.

"This revival is corroborated not only by rising consumer-sentiment indices but also by hard economic indicators, including robust automobile sales, strong demand for consumer durables, and buoyant online-commerce activity," noted Yuvika Singhal, economist at QuantEco Research.

Passenger vehicle dispatches from manufacturers to dealers rose 19% year-on-year in November, indicating that demand remained robust even after the festive period, as per data from industry body Society of Indian Automobile Manufacturers (Siam). Total passenger vehicle sales stood at 412,405 units during the month, up from 347,522 units a year earlier.

Two-wheeler dispatches, a key barometer of mass-market and semi-urban demand, also showed strong momentum. Shipments to dealers increased 21% year-on-year to 1.94 million units in November, compared with 1.60 million units in the same month last year, according to the data.

Markets appeared to have priced in the same optimism. The Nifty Consumption Index, comprising companies linked to domestic demand, has significantly outperformed the benchmark Nifty 50, signalling investor confidence in a consumption-led recovery. Nifty Consumption has jumped over 5% in the past six months, compared to nearly 3% gains in the Nifty 50.

Ajit Mishra, senior vice president of research at Religare Broking, noted that "sectors like FMCG, autos, retail, and consumer-focused financials are benefiting from solid GDP growth, easing inflation, and improving consumer sentiment, making them more resilient than export-driven sectors facing global headwinds."

That confidence extends to earnings expectations. Consumption-oriented companies are likely to see a pickup in volumes and revenues in the second half of FY26, Mishra said. "Lower input costs and better demand are boosting margins, putting them on a stronger profit trajectory compared to the broader market."

The caveat

Yet the rebound comes with clear caveats. Experts caution that the recovery remains uneven, and its sustainability is far from assured. The biggest fault line is the urban–rural divide: while cities are driving the rebound, rural sentiment has improved only slightly.

Mishra said rural confidence is likely to strengthen meaningfully once agricultural incomes and cash flows improve after the kharif season.

There is also the risk that today's lift proves transitory. Singhal cautioned that the durability of the upswing, particularly in urban markets, needs close monitoring, especially as the one-time boost from GST rationalization begins to fade in the fourth quarter of FY26.

Ghosh echoed that concern, noting that policy transmission typically lags actual spending by two to three quarters. "The real test comes in Q4FY26 and Q1FY27," he said.