Retail Spending Grows in Q2 FY27 as Tier 3 Cities Lead
The RAI–Innoviti SANKET report records strong retail growth in smaller cities, rising UPI-linked spending and a 21.7% festive-period increase in eastern India.
India’s retail sector maintained positive growth in the second quarter of FY2026-27, with Tier 3 cities consistently outperforming metros. UPI-linked spending also grew faster than card-linked spending, according to the latest RAI–Innoviti SANKET (Spends & Key Emerging Trends) report.
Developed jointly by the Retailers Association of India (RAI) and Innoviti Technologies, the report draws on more than 70 million purchases across over 100,000 checkout points. Its coverage spans 2,800 towns and cities and more than 10,000 PIN codes across India.
The report tracks like-for-like (LFL) spending at existing stores. This approach helps identify changes in consumer demand without the impact of new store openings.
Retail Spending Maintains Growth in Q2 FY27
Retail spending grew 7.1% year on year in July and accelerated to 9.6% in August. Growth then moderated to 6.8% in September.
Despite the September slowdown, spending growth remained above June’s 4.8%. This indicates continued positive momentum across the quarter.
Tier 3 cities delivered the strongest and most consistent performance compared with Tier 1 markets. Spending in Tier 3 cities grew 8.0% in July, 11.9% in August and 8.6% in September.
By comparison, Tier 1 cities recorded growth of 6.5%, 7.6% and 7.1% over the same months. Since the report measures spending at existing stores, this performance points to stronger underlying demand in smaller cities rather than growth driven by store expansion.
Fashion and Lifestyle Demand Strengthens
Fashion & Lifestyle recorded a notable improvement during the quarter. The category grew 4.5% in July and accelerated to 8.5% in August, before recording 7.7% growth in September.
Grocery & General Retail grew 7.5% in July and 9.9% in August, followed by 6.8% in September.
Consumer Electronics remained relatively stable, with growth ranging from 5.0% to 5.7%. Jewellery & Accessories grew 6.9% in July and 8.4% in August, before slowing to 4.1% in September.
These figures show that category performance varied during the quarter, with Fashion & Lifestyle sustaining strong growth into September.
South India Records Consistent Growth
Regional performance remained positive across all four regions. South India recorded 7.9% growth in both July and September, alongside 9.7% in August.
West India delivered the quarter’s highest regional growth, reaching 10.7% in August. However, East India experienced a sharper slowdown in September, when retail spending growth eased to 2.7%.
A supplementary festive-period analysis offers additional context for eastern India’s performance.
Pre-Navratri Spending in East India Rises 21.7%
The supplementary SANKET analysis examined digitally paid retail spending during the fortnight before Navratri. It compared the period from 28 September to 11 October 2026 with the corresponding pre-Navratri period from 8 to 21 September 2025.
Across India, spending increased by 13.9%. East India recorded stronger growth of 21.7%, compared with 13% across the rest of the country.
Fashion & Lifestyle led the growth in eastern India, rising 28.3% against 14.7% in the rest of India. Grocery & General Retail also performed well, growing 19.4% in the East compared with 13.2% elsewhere.
Meanwhile, Jewellery & Accessories spending increased 13.1% in eastern India, against 8.1% across the rest of the country.
The findings highlight the importance of aligning festive-period comparisons when assessing retail demand. Navratri and Durga Puja fall later in 2026 than in 2025, which can affect monthly spending comparisons.
The festive analysis measures digitally paid spending across comparable festival periods. It is separate from the quarterly report’s monthly like-for-like measurements.
Kumar Rajagopalan, CEO of the Retailers Association of India, said, “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.”
UPI-Linked Spending Outpaces Card Payments
Digital payment trends formed another key finding of the report. UPI-linked spending grew 20.5% in July, 22.6% in August and 17.6% in September.
Card-linked spending, in contrast, recorded changes of -0.6% in July, 0.4% in August and -3.6% in September. This highlights the growing contribution of UPI-linked transactions to organised retail spending.
The difference was particularly clear in grocery retail. UPI-linked spending grew strongly throughout the quarter, while card-linked spending declined. In jewellery, however, card-linked spending grew marginally faster than UPI-linked spending in September.
Rajeev Agrawal, Founder and CEO of Innoviti Technologies, said, “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.”
Festive Season to Shape Retail Demand
The major festive shopping period extends into October and November. As a result, the coming months will provide a clearer picture of consumer demand across discretionary categories, particularly fashion, jewellery and consumer electronics.
The RAI–Innoviti SANKET initiative combines transaction data, industry inputs and broader economic analysis to track spending across categories, regions and payment methods. Its focus on like-for-like performance helps retailers assess demand at existing stores independently of growth from new openings.
The latest findings offer retailers insights into regional demand, category trends and payment preferences as they plan inventory, customer engagement and retail operations for the remainder of the festive season.
About the Retailers Association of India (RAI)
The Retailers Association of India is the national body representing India’s retail industry across multiple channels and formats, including large-format and speciality retail, e-commerce, quick commerce and connected commerce.
RAI works with governments, regulators and industry stakeholders to support a competitive, innovation-friendly retail ecosystem. Through policy advocacy, industry events, research and learning programmes, the association aims to help retail businesses grow, invest and create employment.
