New Delhi: Urban Indian households are preparing for a more cautious festive shopping season in 2026, with average discretionary spending expected to remain around Rs 20,000 as inflation, household expenses and borrowing costs influence purchasing decisions.

Total festive spending by urban households is projected to fall 6% to Rs 1.97 lakh crore this year, compared with Rs 2.10 lakh crore in 2025, according to a survey by LocalCircles. The findings suggest that while consumers continue to plan for Diwali and other celebrations, many are becoming more selective about purchases and how they finance them.

The survey received more than 67,000 responses from urban household consumers across 307 districts in India. It found that 57% of urban households expect to spend on discretionary purchases this festive season, while 31% said they do not plan to spend on such items.

Clothing, footwear and accessories remain the most popular shopping category. However, a substantial proportion of households intend to use savings to finance their festive purchases, indicating that current income may not be sufficient to cover all planned expenses comfortably.

Nearly one in three households plans no festive shopping

The LocalCircles survey points to a clear divide between households planning to shop and those choosing to avoid discretionary purchases altogether.

While 57% of respondents said they expected to spend on non-essential items, 31% reported having no plans for such expenditure. Another 12% were unsure about their likely spending.

Among households planning festive purchases, budgets vary considerably. Around 18% of respondents expect to spend less than Rs 10,000, while 15% have set aside between Rs 10,001 and Rs 25,000.

Another 9% plan to spend between Rs 25,001 and Rs 50,000, while 6% expect their budgets to range from Rs 50,001 to Rs 1 lakh.

At the higher end, 9% of respondents said they could spend between Rs 1 lakh and Rs 10 lakh. These figures indicate that spending intentions differ widely across urban households, depending on their financial circumstances and planned purchases.

The overall picture, however, suggests caution. A significant share of consumers are either planning limited purchases or avoiding discretionary spending altogether.

Rising household expenses can leave less room for shopping after families account for necessities such as groceries, rent, education, healthcare and utility bills. When essential costs consume a larger share of income, purchases such as electronics, new furniture and expensive gifts can become easier to postpone.

Festive spending expected to fall 6% in 2026

The projected decline in spending marks a reversal from the previous year’s growth.

According to LocalCircles, urban household festive expenditure increased from Rs 1.85 lakh crore in 2024 to Rs 2.10 lakh crore in 2025. For 2026, the estimate has fallen to Rs 1.97 lakh crore.

Last year’s festive season coincided with changes under GST 2.0, which took effect on September 22, 2025. The rate revisions provided a tax-related boost to purchases in several consumer categories around the beginning of the festive shopping period.

Consumers do not have an equivalent broad-based tax-led boost identified in the survey for this year’s shopping season.

The expected decline may reflect a combination of price pressures, household budget constraints and changing purchasing priorities. However, the survey figures alone do not establish how much each factor has contributed to the projected reduction.

The spending estimate also needs to be distinguished from actual retail sales. It reflects reported intentions and survey-based projections, which can change as households make their final purchasing decisions.

Inflation puts pressure on household budgets

Inflation remains an important consideration for consumers deciding how much to spend on celebrations.

The supplied figures show retail inflation rising to 5.54% in September from 4.83% in August, while food inflation increased to 7.74%. Higher prices for everyday necessities can reduce the money available for non-essential purchases.

Food costs are particularly significant because they affect nearly every household. When grocery bills rise, families may have to adjust spending on clothing, travel, electronics and other discretionary items.

The effect is not limited to the amount consumers pay at the checkout. Inflation can also reduce the purchasing power of savings and make it harder for households to maintain the same lifestyle without increasing their income.

For families planning festive purchases, this can mean choosing lower-priced products, limiting the number of items bought or postponing expensive purchases until a later date.

RBI rate hike adds to borrowing concerns

Borrowing costs are another factor influencing household spending decisions.

The supplied report states that the Reserve Bank of India raised the repo rate by 25 basis points to 5.50% on October 7, its first increase in more than three and a half years. Higher policy rates can make borrowing more expensive when banks pass the increase on to customers.

The impact on individual borrowers depends on their loan terms, the type of interest rate and how financial institutions adjust lending rates.

For households already paying home loan, vehicle loan or other instalments, an increase in borrowing costs can make it harder to justify additional expenditure on non-essential goods.

Consumers who rely on credit cards, personal loans or instalment-based purchases may also pay closer attention to the total cost of buying expensive products.

The survey’s findings therefore come at a time when some households may be prioritising financial commitments over discretionary purchases.

The report also cites an RBI inflation forecast of 5.2% for the financial year and an expectation that inflation could reach 6% in the October-December quarter. At the same time, the central bank raised its FY27 GDP growth forecast to 7.1%.

These broader economic indicators suggest that overall economic growth and household spending confidence do not necessarily move in the same direction for every consumer group.

Clothing and footwear lead festive shopping plans

Despite the cautious outlook, clothing, footwear and accessories remain the most popular categories among households planning to shop.

Around 72% of respondents intending to make festive purchases said they planned to spend on these items.

New clothes and footwear are traditionally associated with festive celebrations, family gatherings and social events. They can also be easier to accommodate within a limited budget than large-ticket purchases such as cars, premium smartphones or major home appliances.

Home appliances and furniture, along with travel and holidays, were each included in the plans of 45% of respondents.

Gourmet food and gifting featured in the plans of 39% of households. Mobile phones, consumer electronics and gadgets were each listed by 22% of respondents, while 22% intended to spend on home renovation and interiors.

Around 10% planned to purchase an automobile or a two-wheeler.

Jewellery attracted relatively limited interest, with only 6% of respondents planning a purchase in the category.

High precious metal prices could be one factor influencing jewellery budgets, although the survey figures do not establish a direct link between prices and individual purchasing decisions.

The category-wise findings suggest that consumers may continue to participate in festive shopping but prioritise purchases they consider necessary or more affordable.

Smartphone purchases face a challenging season

Consumer electronics are another category where households may be weighing their budgets more carefully.

The supplied report cites Counterpoint Research as expecting festive smartphone volumes to decline 12% year-on-year, even as the value of sales rises.

A fall in the number of devices sold alongside an increase in sales value can occur when consumers purchase more expensive models or average selling prices increase. It does not necessarily mean that every smartphone category is experiencing the same trend.

For buyers, higher device prices can make upgrading a phone less attractive, particularly if the existing device remains functional.

Some consumers may opt for mid-range models, wait for discounts or delay purchases until a later sale period. Others may prioritise smartphones because they are essential for work, education and everyday communication.

The survey’s broader findings are consistent with a more selective approach to spending, although individual purchasing decisions will depend on product needs, discounts and household budgets.

Households plan to use savings for festive purchases

One of the survey’s most significant findings concerns how consumers intend to pay for their shopping.

According to LocalCircles, 83% of households planning discretionary spending expect to use their savings to some extent.

Around 34% expect savings to cover at least a quarter of their festive budget. Within this group, 18% said they planned to fund between 25% and 50% of their expenditure through savings, while 16% expected to pay for their festive purchases entirely from savings.

By comparison, 17% said they would rely entirely on their earnings without using savings.

The figures suggest that many households intend to draw on money accumulated earlier rather than depend exclusively on their current income to fund festive purchases.

Using savings can help consumers avoid taking on additional debt. However, spending too much of an emergency fund or money set aside for future goals can leave households with less financial flexibility if an unexpected expense arises.

A balanced approach involves distinguishing between money available for celebrations and funds required for emergencies, healthcare, education, loan repayments or other planned expenses.

Why consumers may be choosing smaller purchases

The survey points towards a festive season in which households are weighing celebrations against other financial priorities.

Families may still buy clothes, exchange gifts, travel or purchase household goods, but they could be more selective about the number and value of items they choose.

Some may postpone large purchases, while others could focus on discounts or products that fit within predetermined budgets.

The 6% projected fall in total festive expenditure also suggests that strong shopping activity in selected categories may not necessarily translate into higher overall spending.

Retailers could therefore face a market in which consumers remain interested in festive offers but are more conscious of prices and the need to manage household finances.

At the same time, survey responses represent spending intentions rather than final expenditure. Actual sales could differ as discounts, income changes and consumer sentiment influence decisions during the festive period.

A more budget-conscious Diwali season

The LocalCircles findings indicate that urban India is approaching the 2026 festive season with greater attention to household budgets.

The projected spending decline, the share of households avoiding discretionary purchases and the expected reliance on savings all point to consumers making more deliberate decisions about how much they can afford.

Clothing, footwear, travel and household purchases remain part of festive plans, but expensive products such as jewellery and smartphones may receive more selective consideration from some buyers.

For households, the challenge is to balance the desire to celebrate with the need to preserve financial stability. Setting a spending limit, comparing prices and avoiding unnecessary borrowing can help keep festive expenditure manageable.

Ultimately, the survey suggests that the question for many urban consumers this year is not whether to celebrate, but how to do so without placing additional pressure on their finances.