India’s Economy Grows, But Household Spending Lags: DSP Report

India’s economy shows robust headline growth across key indicators, yet household consumption recovery remains uneven, according to a July 2026 report by DSP Mutual Fund. The report, titled “Tathya,” highlights that many impressive year-on-year growth figures are boosted by a low base from the previous year.

Unpacking Consumption Trends

Despite significant increases in several demand indicators, the underlying consumption trend is not yet widespread. DSP Mutual Fund cautions that the current activity, while improved absolutely, is still “patchy” rather than a sustained boom.

• Outstanding personal loans rose 15.4% year-on-year in June, reaching ₹70.2 lakh crore.
• Retail payments increased by 12.8%, totaling ₹92.5 lakh crore.
• Passenger vehicle sales climbed 23.2% to 380,000 units.
• Two-wheeler sales grew by 18.6%, reaching 1.85 million units.

These double-digit growth rates require cautious interpretation due to favorable base effects. Consumers are indeed spending more than a year ago, but the improvement has not yet become broad-based enough to signal a durable consumption cycle across all sectors.

Key Financial Indicators

While some sectors thrive, others show moderation, and inflation poses a growing challenge to household budgets. This mixed picture prevents a uniform economic uplift at the ground level.

• Housing finance loan growth slowed to 10.9% year-on-year in June, suggesting a potential loss of momentum in significant household purchases.
• Consumer price inflation accelerated to 4.4% in June, a notable increase from 1.2% in December 2025.
• Wholesale inflation reached 8.3%, adding pressure on costs.

Persistent high inflation could curb discretionary spending if income growth does not keep pace with rising prices. This dynamic adds complexity to the overall economic recovery narrative.

Sectoral Strengths and Fiscal Overview

Manufacturing and services continue to be bright spots, providing crucial support to the broader economic framework. These sectors demonstrate significant expansion and credit absorption.

• Credit to industry expanded by 17.5% year-on-year.
• The Manufacturing PMI remained in expansion territory at 54.2.
• Capital goods output surged by 30.9%.
• The Services PMI stood strong at 57.4.
• Credit to services grew by 20.4%.

On the fiscal front, government expenditure increased by 9.1% in June, though capital expenditure saw a slight decline of 0.6%. The DSP Mutual Fund report concludes that while India’s economy is expanding, propelled by manufacturing, services, and consumer credit, the recovery at the household level remains uneven and not yet self-sustaining.