New data points to a sharper divide in consumption trends in rural, urban India

Indian households are navigating a markedly different spending landscape in 2026, with urban consumers tightening their belts while rural households continue to ramp up outlays, highlighting a widening consumption gap amid mounting financial pressures. The Kharcha study by Worldpanel by Numerator reveals that urban quarterly expenditure declined 4% year-on-year in Q1 2026, marking a stark contrast to the 14% growth witnessed in the previous year.

This shift marks the first time in the study's four-year history that urban consumption has led the slowdown. Both affluent and less affluent urban households experienced a 4% contraction in spending, ranging from Rs 49,832 to Rs 81,759 per quarter. In comparison, rural household expenditure grew 15%.

The composition of household spending reveals a shift towards durables, as consumer durables gained share, particularly among rural and less affluent households. However, this growth was accompanied by higher EMI outlays, squeezing short-term disposable income. Consumers are becoming more selective, prioritizing value and necessity over discretionary spending.

Grocery spending also faced pressure, with all-India quarterly grocery expenditure falling 1% to Rs 13,127, following a 10% increase the prior year. Rural grocery spending declined 5%, although dairy and fresh produce remained relatively resilient. The Category Importance Score, which measures the essential nature of a category to shoppers, saw LPG, mobile internet, cooking oil, fresh produce, and fuel as the top categories.

However, higher spending on these categories is largely driven by rising costs rather than increased consumption. For instance, 89% of households attributed the increase in LPG expenditure to higher prices, while 73% cited rising costs for mobile internet and fuel. Despite this, households are still trimming convenience-led and discretionary consumption, opting for noodles, milk food drinks, packaged juices, cheese, and salty snacks less frequently due to budget constraints and health considerations.

The financial outlook is increasingly cautious, with only 16% of households reporting they are living comfortably, down from 28% in December. While 28% described their financial situation as struggling, the majority, at 56%, indicated conditions were tougher than earlier but they were still managing. External cost pressures, such as energy price volatility, were cited as the leading global concern by 59% of households, with 82% worried about rising fuel prices and 61% concerned about higher food and grocery prices.

Some households reported difficulty accessing cooking gas, leading them to restrict usage or switch to alternative fuels and electric appliances. The near-term outlook has weakened further, with the proportion of households expecting conditions to worsen over the next three months doubling to 18% from 9%, while only 23% expect conditions to improve.