$40 billion consumption boom coming soon! Is your stock portfolio ready to ride it?

Time of India

a day ago

A $40 billion demand bomb is ticking quietly beneath the surface of India's economy. And when it explodes over the next 18 to 24 months, it could be the next big theme for
stock market investors
. With nearly 1.5 billion mouths to feed and wallets fattened by
tax cuts
, pay hikes, and cheaper loans, the timing of this
consumption
wave could be as significant as its size.
Analysts at HSBC Securities peg the annual boost to discretionary consumption between $30–40 billion. The math stacks up quickly: lower personal taxes alone are expected to free up $12 billion in savings. If the 8th Pay Commission delivers its anticipated 15% salary hike, another $18–26 billion could land in the hands of government and defence employees. Add $3–4 billion in mortgage savings from falling interest rates, and you're looking at a consumption cocktail strong enough to stir the markets.
This isn't just theoretical liquidity. HSBC's research estimates India's discretionary spending base at about $250 billion, meaning the upcoming stimulus could increase spending capacity by nearly 15%, a jolt of real money in real hands. While a portion of the gains may be saved or invested, the prevailing view among analysts is clear: a large share will flow into consumption.
Rahul Bajoria of BofA Securities says there are growing signs that consumption indicators in India are poised to improve as policy support continues to build. Inflation remains tame, monetary easing has been front-loaded, and low commodity prices are cushioning input costs. Even though overall private consumption growth has slowed in line with GDP, Bajoria believes it will soon outpace GDP as household incomes stabilize, tax burdens decline, and credit availability improves. BofA expects real wages, especially in rural India, to materially strengthen, thanks to low food inflation and stable income trends.
The cumulative 100 basis points of rate cuts delivered so far, liquidity easing of over Rs 12 lakh crore, and regulatory rollbacks on NBFC and MFI risk weights are all lining up to reignite urban demand. Bajoria also highlights that personal credit growth, which had been a major drag on consumption, is set to improve meaningfully in the coming quarters.
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What should investors do?
Yogesh Aggarwal at HSBC points out that while it's hard to pinpoint which sectors will benefit most, the average Indian consumer is clearly heading toward a higher-spending mode. This includes automobiles, consumer goods, electronics, and out-of-home categories like dining. According to him, the broad-based nature of this consumption revival is what makes it powerful as it isn't limited to a niche, but cuts across multiple product baskets and income segments.
Kunal Vora of
BNP Paribas
notes that scalable consumer opportunities are finally emerging, especially in the food delivery and quick commerce space. After years of aggressive competition, the food delivery industry is now a functional duopoly with viable economics. Vora sees Swiggy and Eternal as key beneficiaries of this consumption re-rating, with both poised to generate significant cash flows and capture a larger share of India's $1 trillion retail opportunity.
There's also a valuation argument in play. Nomura points out that consumer
stocks
have already corrected meaningfully over the last six months and are now trading a full standard deviation below their five-year averages. The recent consumption slowdown had pushed many companies into earnings downgrades, but the administration's renewed focus on demand revival via fiscal and monetary levers is now beginning to show results.
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Nomura believes inflation moderation and GDP recovery, aided by the FY26 tax cut, will support volume recovery and improve margins, particularly as raw material softness filters through to the bottom line. Its preferred names include GCPL, Marico and Tata Consumer—firms that are showing strength in pricing, premiumisation, innovation, and brand equity.
Rural India is also joining the consumption comeback. Incred Equities highlights a sharp 3.3% rebound in rural consumer sentiment in May 2025, driven by solid returns from rabi crops, early monsoon arrival, and bullish forecasts for the kharif season. Easing fuel prices and RBI's rate cuts have added to the urban-rural alignment of consumer confidence.
At Edelweiss Mutual Fund, Trideep Bhattacharya says the pieces are finally falling in place. Inflation has dropped, liquidity has eased, and the budget has effectively handed urban consumers a 5–7% income boost. He believes the second half of the year will mark a decisive turn in consumption, calling it the dark horse of 2025. His fund launched a consumption strategy earlier this year based on this thesis. While staples have lagged due to pressure on mass-market demand, discretionary categories are already showing signs of a turnaround.
For investors, the $40 billion question isn't whether this consumption surge will happen but whether they're positioned to ride it. The macro tailwinds are visible, the liquidity is real, and the runway looks unusually long. The last time this many levers were aligned, Indian consumption stocks delivered multibagger returns. History might not repeat but could rhyme with compounding.
(
Disclaimer
: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)