Retail Spending Grows 7.1% in July, 9.6% in August as Tier 3 Cities Outperform Metros: RAI–Innoviti Report

Supplementary festive-period analysis records 21.7% growth in eastern India’s pre-Navratri spending, with Fashion & Lifestyle leading at 28.3%.

India's retail sector maintained positive growth during the second quarter of FY2026-27, with Tier 3 cities consistently outperforming Tier 1 markets and UPI-linked spending growing faster than card-linked transactions, according to the latest RAI–Innoviti SANKET (Spends & Key Emerging Trends) report.

Jointly developed by the Retailers Association of India (RAI) and Innoviti Technologies, the report analyses more than 70 million purchases recorded across over 100,000 checkout points in 2,800 towns and cities and more than 10,000 PIN codes. It tracks like-for-like (LFL) spending at existing stores to assess consumer demand across retail categories, regions and payment methods.

Retail spending grew 7.1% year-on-year in July, accelerated to 9.6% in August and moderated to 6.8% in September. Despite the September slowdown, growth remained above the 4.8% recorded in June.

Tier 3 Cities Maintain Stronger Retail Growth

Smaller cities continued to outperform Tier 1 markets throughout the quarter. Tier 3 cities recorded retail spending growth of 8.0% in July, 11.9% in August and 8.6% in September.

By comparison, Tier 1 cities registered growth of 6.5%, 7.6% and 7.1%, respectively. Since the report measures spending at existing stores, the findings indicate stronger underlying demand in smaller markets rather than growth driven by new store openings.

Fashion & Lifestyle Gains Momentum

Fashion & Lifestyle recorded improved growth during the quarter, rising from 4.5% in July to 8.5% in August before moderating to 7.7% in September.

Other categories showed varied performance:

Grocery & General Retail: Growth of 7.5% in July, 9.9% in August and 6.8% in September.
Consumer Electronics: Growth remained relatively stable, ranging between 5.0% and 5.7%.
Jewellery & Accessories: Growth reached 6.9% in July and 8.4% in August before easing to 4.1% in September.

Regional Performance Varies Across India

South India recorded consistent growth of 7.9% in July and September, alongside 9.7% in August. West India registered the highest regional growth during the quarter at 10.7% in August.

All four regions maintained positive growth, although East India experienced the sharpest moderation in September, when retail spending growth eased to 2.7%.

Pre-Navratri Spending in East India Rises 21.7%

A supplementary SANKET analysis of digitally paid retail spending during the fortnight preceding Navratri showed stronger festive consumption in eastern India.

The analysis compared spending between September 28 and October 11, 2026, with the corresponding pre-Navratri period from September 8–21, 2025. Retail spending across India grew by 13.9%, while East India recorded 21.7% growth, compared with 13% across the rest of the country.

Fashion & Lifestyle was the strongest-performing category in East India during this period, registering 28.3% growth against 14.7% in the rest of India.

Other category comparisons included:

Grocery & General Retail: 19.4% growth in East India versus 13.2% elsewhere.
Jewellery & Accessories: 13.1% growth in East India compared with 8.1% in the rest of the country.

The report notes that the timing of festivals is important when interpreting retail performance. With Navratri and Durga Puja falling later in 2026 than in 2025, comparisons between equivalent festive periods provide additional context beyond monthly spending figures.

The supplementary analysis covers digitally paid spending across festival-aligned periods and 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 Transactions

The report also identified a widening difference between UPI-linked and card-linked spending in organised retail.

UPI-linked spending grew 20.5% in July, 22.6% in August and 17.6% in September. In comparison, card-linked spending recorded changes of -0.6%, 0.4% and -3.6%, respectively.

The difference was particularly evident in grocery retail, where UPI-linked spending increased 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 Provide Further Insights

With the major festive shopping period extending into October and November, the coming months are expected to provide a more complete picture of consumer demand across discretionary categories, particularly fashion, jewellery and consumer electronics.

The report offers retailers insights into spending patterns as they plan for the remainder of the festive season. The RAI–Innoviti SANKET initiative combines retail transaction data, industry inputs and broader economic analysis to track spending trends across categories, regions and payment methods.

Its focus on like-for-like performance helps retailers assess demand at existing stores independently of growth resulting from new store openings.