The Indian retail industry, having navigated past disruptions, is building a robust foundation for 2026. The sector, which holds the position of the world's third-largest retail market, is expected to witness improved margins and accelerated growth. This optimism is fueled by a significant shift in consumer demand from major metropolitan areas to Tier II and III cities, alongside rapid digital adoption and policy support.
The Pillars of Optimistic Growth
Valued at approximately USD 1.1 trillion, the industry's trajectory is supported by strong domestic consumption, technological innovation, and rising consumer expectations. Anand Ramanathan, Partner & Consumer Industry Leader at Deloitte India, describes the 2026 outlook as "highly optimistic," anticipating continued double-digit growth. He cites a projected GDP growth of 6.4 to 6.7 per cent, controlled inflation, and robust consumer sentiment as key macroeconomic drivers.
A defining trend is the "Bharat surge." Aditya Priyadarshan, Managing Director (Partner) at Accenture Strategy and Consulting, emphasized that 2025 saw Tier 2 and Tier 3 cities not just participating in, but leading retail growth. This geographic expansion is complemented by a value retail boom and the parallel trend of premiumisation, driven by a growing middle and affluent class. Policy measures like GST reforms, income tax relief, a good monsoon, and higher Minimum Support Prices (MSP) have further bolstered consumer demand and market formalisation.
Technology and Experience as Key Differentiators
The integration of technology is reshaping the retail landscape. E-commerce penetration is deepening, reaching more consumers in smaller towns and rural areas. Quick commerce and social commerce continue to disrupt traditional models, while omnichannel maturity is enabling unified customer experiences and flexible fulfilment options.
Nishank Joshi, Chief Marketing Officer of Nexus Select Malls, noted that 2025 saw rapid digitisation in advertising and a shift towards experiential formats that drive mall traffic. Data-backed insights are allowing retailers to understand shoppers with greater precision. Paresh Parekh, Partner and National Leader for Tax – Consumer Products and Retail Sector at EY India, expects deeper AI-led decision-making across pricing and supply chains to be a hallmark of 2026.
Navigating Persistent Challenges
Despite the positive outlook, the sector must contend with several hurdles. Industry leaders point to growing rentals, fierce competition across both digital and physical channels, and the complexity of integrating seamless omnichannel experiences. Persistent supply chain inefficiencies, potential margin squeezes, and a critical shortage of skilled talent add to the challenges.
Lalit Agarwal, Managing Director of V-Mart, highlighted that 2025 was challenging for branded and premium retail, with margins under pressure partly due to GST changes that forced discount-driven liquidation of old inventory. Kumar Rajagopalan, CEO of the Retailers Association of India (RAI), stated that growth in 2026 will be shaped less by demand alone and more by competition, operational efficiency, and the ability to serve diverse markets.
The consensus among experts is that the next phase of growth will be margin-led rather than volume-led. Retailers that combine cost discipline with technology to deliver personalisation and seamless execution are poised to become long-term leaders. As Shriram PM Monga, Co-Founder of SRED Real Estate Advisory, envisions, the future includes building globally benchmarked, tourism-led shopping districts that celebrate Indian culture and unlock new economic value, signaling the industry's readiness for its next leap.
