Mint Primer: Will FY26 be the year of the Indian consumer?

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What are earnings previews predicting?

Brokerage firms say they expect consumer packaged goods firms to report 6-8% growth in sales for the quarter although several are likely to see a drop in their Ebitda (earnings before interest, taxes, depreciation, and amortisation) and net profits. Equities brokerage firm IIFL Capital wrote this month that consumer demand continues to be “subdued" and that some of the growth in companies’ topline will likely come from price hikes. Besides, the industry’s margins will be squeezed because inflation is driving up costs of inputs such as wheat, coffee, and palm oil. Trump’s new tariffs may drive these costs up further.

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What are consumer companies saying?

FMCG firms are warning investors about a consumer slowdown. Marico and Dabur told investors in a note that rural demand is growing ahead of urban but high inflation and stagnant wages are hurting sales overall. Marico said sales of its flagship Parachute coconut oil were affected as it hiked prices and reduced package sizes. For Dabur, a delayed and unusually short winter hurt the company’s sales overall as customers bought fewer bottles of the company’s Chyawanprash and honey, both marketed for the winter season. Dabur added that the general trade channel was hurting even as quick commerce and supermarkets grew.

So is the situation dire for all consumer categories?

No. There are pockets of optimism. Consumer durables companies are expecting a good season this year, especially for air conditioner sales. Car makers will also likely report good sales for the March 2025 quarter as they pushed discounts and deals for the Eid and Navratri festive season. The government’s Vahan portal data shows passenger vehicle sales for March 2025 grew 5% year on year while electric 2-wheelers rose 7%.

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So will India’s consumer economy be back on track in FY26?

Perhaps. There are encouraging signs. For instance, an early and extremely hot summer is expected to drive sales of ACs and fans. Nomura’s brokerage arm wrote in a note this month that AC primary sales likely grew by 20-25% in the March quarter as the IMD forecasted a fierce summer and retailers stocked up. Besides, AC makers like Blue Star said they will likely hike prices this month. Similarly, leading car makers including Hyundai and Maruti Suzuki have hiked prices. Besides, the RBI’s Monetary Policy Committee is likely to cut rates again this week, boosting consumer demand.

Are there risks to this turnaround?

Yes. The IMD has predicted a normal monsoon so far, but it will release an official update only later this month. But, a deficit or a surplus in this year’s monsoon could hurt rural areas which are currently fuelling consumer demand. Besides, the US’ recently imposed tariffs has thrown a spanner in the global economy. The aftershocks of these tariffs and resulting global uncertainty could hurt jobs and income growth in India’s export-oriented industries such as IT services. In the long run, these changes could hurt discretionary incomes of urban, premium consumers, hurting growth in consumer demand.