India’s economic momentum stalls

The trend: Several economic signals suggest that retailers and brands looking to India to fuel growth may need to recalibrate their expectations.

• The Federation of Indian Chambers of Commerce and Industry recently lowered its 2025 GDP growth projection to 6.4% YoY from the 7.0% forecast in September and a considerable slowdown from the 8.2% growth generated in 2023 and 2024.
• The country’s stock market recently wiped out six months of gains, and the rupee's rapid decline against the dollar is shrinking the global value of homegrown earnings, adding further pressure, according to The New York Times.

We’ve also revised our expectations for India’s retail sector. We expect retail and ecommerce sales growth of 8.0% this year, down from 9.5% forecast in June 2023.

Why it matters: Several brands have bet on India as the next major fashion destination, driven by its growing affluent population and a strategy to reduce reliance on China.

• One in 5 fashion executives called India a focus market for 2025, per​​ a survey by BoF and McKinsey.
• Luxury brands Hermès, Christian Dior, and Bulgari have recently expanded their footprint in the region, as have retailers such as Victoria’s Secret, Uniqlo, New Balance, and Foot Locker.

Our take: India’s retail industry faces a significant challenge: a lack of consumer demand. Despite the country’s economic progress in recent years, a large segment of the population continues to struggle with limited disposable income, leaving many unable to afford basic necessities, let alone discretionary purchases.

Unless India can drive up workers’ wages and create more employment opportunities, its vision of becoming a global economic powerhouse will remain elusive.

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