India’s retail sector kept growing through the second quarter of FY2027, with smaller cities consistently outperforming metros and UPI-linked spending rising far faster than card-linked spending, according to the latest RAI-Innoviti SANKET (Spends & Key Emerging Trends) report.
The report, developed jointly by the Retailers Association of India (RAI) and Innoviti Technologies, draws on more than 70 million purchases at over 100,000 checkout points across 2,800 towns and cities and more than 10,000 PIN codes. It tracks like-for-like (LFL) spending at the same stores.
Quarterly momentum
Retail spending grew 7.1% year-on-year in July, accelerated to 9.6% in August and eased to 6.8% in September. Even after the moderation, growth stayed above June’s 4.8%.
Tier 3 cities lead
Tier 3 markets grew 8.0% in July, 11.9% in August and 8.6% in September. Tier 1 cities recorded 6.5%, 7.6% and 7.1% over the same months. Because the data covers existing stores, the findings point to stronger underlying demand in smaller cities rather than growth from store expansion.
Category trends
- Fashion & Lifestyle: rose from 4.5% in July to 8.5% in August, then held at 7.7% in September.
- Grocery & General Retail: grew 7.5%, 9.9% and 6.8% across the three months.
- Consumer Electronics: stayed relatively stable, between 5.0% and 5.7%.
- Jewellery & Accessories: grew 6.9% in July and 8.4% in August, then slowed to 4.1% in September.
Regional picture
South India was the most consistent region, growing 7.9% in July and September and 9.7% in August. West India posted the quarter’s highest regional growth, 10.7% in August. All four regions stayed positive, but East India saw the sharpest September slowdown, with growth easing to 2.7%.
Festive analysis shows stronger East
A supplementary SANKET analysis of the fortnight before Navratri offered a different view of eastern India. It compared digitally paid retail spending from September 28 to October 11, 2026, with the equivalent pre-Navratri period of September 8-21, 2025. Spending across India grew 13.9%. East India recorded 21.7%, well ahead of 13% in the rest of the country.
Fashion & Lifestyle was the strongest category in the East, growing 28.3% against 14.7% elsewhere. Grocery & General Retail rose 19.4% in the East versus 13.2% in the rest of India, and Jewellery & Accessories grew 13.1% versus 8.1%.
The findings underline the need to account for the festive calendar, as Navratri and Durga Puja fall later in 2026 than they did in 2025. The supplementary analysis covers digitally paid spending over festival-aligned periods and is separate from the quarterly report’s like-for-like monthly measure.
“India’s retail sector continues to show encouraging signs, with positive growth across categories and regions, and smaller cities emerging as increasingly important consumption markets. The strong pre-Navratri spending in eastern India is another positive indicator. However, with the festive season falling later this year compared to 2025, a more accurate assessment of consumer demand will come from comparing spending across corresponding festive periods, rather than individual calendar months. While the early indicators are encouraging, the full picture of festive consumption will become clearer once the season concludes,” said Kumar Rajagopalan, CEO, Retailers Association of India.
UPI surges, cards decline
UPI-linked spending grew 20.5% in July, 22.6% in August and 17.6% in September. Card-linked spending changed by -0.6%, 0.4% and -3.6% over the same months. The gap was widest in grocery, where UPI-linked spending grew strongly all quarter while card-linked spending fell. In jewellery, card-linked spending grew marginally faster than UPI-linked spending in September.
“The findings reinforce the importance of looking beyond headline growth numbers to understand how and where consumers are spending. The consistent performance of Tier 3 cities, the increasing contribution of UPI-linked transactions and the variation in category demand provide valuable insights into the changing retail landscape. The festive-period analysis is particularly interesting because it shows how consumer spending can shift with the festival calendar, something that monthly comparisons may not fully capture. For retailers, understanding these patterns can help improve inventory planning, customer engagement and payment experiences, allowing them to respond more effectively to changing demand,” said Rajeev Agrawal, Founder and CEO, Innoviti Technologies.
Outlook
With the main festive shopping period extending into October and November, the coming months should give a fuller picture of demand across discretionary categories, particularly fashion, jewellery and consumer electronics.
The RAI-Innoviti SANKET initiative combines retail transaction data, industry inputs and analysis of broader economic developments to track spending across categories, regions and payment methods. Its like-for-like focus isolates demand at existing stores from growth driven by new openings.
