India's retail sector maintained positive growth through the second quarter of FY2026-27, with smaller cities consistently outperforming metros and UPI-linked spending growing significantly faster than card-linked spending, according to the latest RAI–Innoviti SANKET (Spends & Key Emerging Trends) report.
The report, jointly developed by the Retailers Association of India (RAI) and
Innoviti Technologies, draws insights from over 70 million purchases captured at more than 100,000 checkout points across 2,800 towns and cities and over 10,000 PIN codes in India. It tracks like-for-like (LFL) retail spending at the same stores, providing insights into consumer demand across categories, geographies and payment methods.
Retail spending registered 7.1% year-on-year growth in July, accelerated to 9.6% in August and moderated to 6.8% in September. Despite the moderation, growth remained above the 4.8% recorded in June, indicating sustained positive momentum during the quarter.
One of the key findings was the performance of smaller cities. Tier 3 markets recorded 8.0% growth in July, 11.9% in August and 8.6% in September, consistently outperforming Tier 1 cities, which registered growth of 6.5%, 7.6% and 7.1%, respectively. Since the analysis measures spending at existing stores, the findings point to stronger underlying retail demand in smaller cities, rather than growth arising from store expansion.
Among retail categories, Fashion & Lifestyle showed significant improvement, growing from 4.5% in July to 8.5% in August and maintaining 7.7% growth in September. Grocery & General Retail registered growth of 7.5%, 9.9% and 6.8% across the three months. Consumer Electronics remained relatively stable, with growth ranging between 5.0% and 5.7%, while Jewellery & Accessories recorded 6.9% growth in July, 8.4% in August and 4.1% in September.
Regionally, South India demonstrated the most consistent performance, recording 7.9% growth in July and September and 9.7% in August. West India registered the highest regional growth during the quarter at 10.7% in August. While all four regions maintained positive growth, East India witnessed the sharpest moderation in September, with growth easing to 2.7%.
However, a supplementary SANKET analysis of spending during the fortnight preceding Navratri revealed a stronger picture of festive consumption in eastern India. Comparing digitally paid retail spending between September 28 and October 11, 2026, with the corresponding pre-Navratri period of September 8–21, 2025, the analysis found that spending across India grew by 13.9%. East India recorded 21.7% growth, significantly ahead of the 13% recorded across the rest of the country.
Fashion & Lifestyle emerged as the strongest-performing category in eastern India during this period, registering 28.3% growth compared with 14.7% in the rest of India. Grocery & General Retail grew by 19.4% in the East, against 13.2% elsewhere, while Jewellery & Accessories recorded growth of 13.1%, compared with 8.1% in the rest of the country.
The findings highlight the importance of accounting for changes in the festive calendar when assessing retail performance. With Navratri and Durga Puja falling later in 2026 than in the previous year, a comparison of equivalent festive periods offers additional context to the monthly spending trends. The supplementary analysis covers digitally paid spending over festival-aligned periods and is distinct from the quarterly report's like-for-like monthly measurement.
Commenting on the findings, Kumar Rajagopalan, Chief Executive Officer, Retailers Association of India (RAI), said:
"India's retail sector continues to demonstrate resilience, with positive growth across categories and regions, and smaller cities emerging as increasingly important consumption markets. A supportive policy environment, along with the retail industry's continued efforts to improve accessibility, product offerings and customer experience, remains important to sustaining this momentum. The stronger pre-Navratri spending in eastern India is also encouraging and highlights the need to assess festive demand over the entire season rather than through individual monthly numbers. While the overall trends are positive, retailers will continue to remain attentive to evolving consumer spending patterns."
The report also highlighted the changing pattern of digital payments in organised retail. UPI-linked spending registered growth of 20.5% in July, 22.6% in August and 17.6% in September, significantly outperforming card-linked spending, which recorded changes of -0.6%, 0.4% and -3.6%, respectively. The difference was particularly evident in grocery retail, where 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.
Sharing his perspective, Rajeev Agrawal, Founder and CEO, 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."
With the major festive shopping period extending into October and November, the coming months will offer a more complete picture of consumer demand across discretionary categories, particularly fashion, jewellery and consumer electronics. The report's findings provide retailers with a view of spending trends as they prepare for the remainder of the festive season.
The RAI–Innoviti SANKET initiative combines retail transaction data, industry inputs and analysis of broader economic developments to track consumer spending trends across categories, regions and payment methods. Its focus on like-for-like performance helps retailers better understand demand at existing stores, independently of growth driven by new store openings.
About Retailers Association of India (RAI)
The Retailers Association of India is the national body representing India's retail industry across all channels and formats, from large format and specialty retail to e-commerce, quick commerce, and connected commerce businesses. RAI works with governments, regulators, and industry stakeholders to enable a competitive, innovation-friendly retail ecosystem. Through policy advocacy, industry events, research, and learning programmes, RAI builds the conditions for retail to grow, invest, and create employment at scale. India's retail future is connected. RAI is building for it.
