economy · 2026-09-06
India's Spending Mix Shifts, Not Its Size
Indians spent 18% more on alcohol, tobacco and personal care in 2024-25, but total consumption grew at the same 6% pace as last year, so households are reshuffling their budgets, not spending more overall.
What's behind this spending reshuffle?
Rising incomes are the mechanism: broad industry data shows discretionary spending's share of household budgets climbing from 45% in FY13 to 48% by FY25, while food's share of total spending has fallen from 57% to under 49% since 2010. As incomes cross thresholds, households swap staples for premium goods and services rather than spending more overall, which is exactly the pattern this year's data shows.
Why does a rising income level push spending toward services, not just?
Across income brackets, essentials lose share almost mechanically: India's food share fell from 57% in 2010 to 48% by 2024, while urban households, more advanced on this curve, spend nearly 60% on non-food versus food already. Services like insurance and health grew 10% and 9% this year, showing where budgets go once staples are covered.
How does this spending shift show up in government coffers?
Since GST is levied on final consumption, a heavier tilt toward services and taxed categories like alcohol and tobacco feeds straight into collections: gross domestic GST revenue rose 7.8% year-on-year through October 2025. Watch whether this pace holds once festive-season spending fades and monthly growth reverts to trend.
Did overall household spending power actually rise?
Yes, but only slightly and unevenly. Total household spending (PFCE) grew nearly 6% in real terms in 2024-25, matching last year's pace, so people are not spending more overall relative to before. Per-person spending rose too: real per-capita PFCE went from ₹1,17,356 to ₹1,27,627. The gain came from a shift of the budget toward services and non-essentials, not a broad jump in buying power.
Why does a rising income level push spending toward services, not just?
Across income brackets, essentials lose share almost mechanically: India's food share fell from 57% in 2010 to 48% by 2024, while urban households, more advanced on this curve, spend nearly 60% on non-food versus food already. Services like insurance and health grew 10% and 9% this year, showing where budgets go once staples are covered.
How does this spending shift show up in government coffers?
Since GST is levied on final consumption, a heavier tilt toward services and taxed categories like alcohol and tobacco feeds straight into collections: gross domestic GST revenue rose 7.8% year-on-year through October 2025. Watch whether this pace holds once festive-season spending fades and monthly growth reverts to trend.
Source: economictimes.indiatimes.com