Indian Recession 2026?

4 Key states in India - Tamil Nadu, West Bengal, Assam and Kerala go for polling during April 2026. The two-phase elections will be over by end of April. Results shall be announced on 4 May 2026.

In a recent report, Kotak Corporate, Institutional & Investment Banking projects a steep increase of a Rs 25–28 per litre of petrol and diesel. The crude oil is staying close to  USD 120 per barrel and given the situation, the cost of refining and selling fuel far exceeds current retail prices.

India’s Modi Government is funding INR 27,000 cr pm to bridge the gap between crude costs and retail prices, a figure that is simply not sustainable over an extended period.

In the days and weeks to come, expect a raise in transportation expenses, increased delivery charges, and influence demand in sectors like automobiles and rural markets.

To begin with, fruits and vegetables will get more expensive. And disproportionately This will impact what the Indian middle class households will buy; and how the Summer (vacation) of 2026 will unfold at homes. 

Eating out will become more expensive, with Restaurants passing over the incremental (procurement and distribution) costs to diners. 

Ordering food home will be a lot more expensive - expect additional delivery charges as the Gig workers will require higher incomes to cover higher petrol costs. 

With FMCG companies unable to increase distributors and retail margins immediately, the supply chain ecosystem will face a huge short- to mid-term (say 6 months) challenge, until MRP of products is revised in a phased manner ahead of Q3 Festival season. 

Vacations would get costlier. A 300-km drive to hometown during May and June will increase the cost of travel will setback the family by (300kms /15 kmpl = 20 litres * INR 25 incremental) INR 500 on an average. Toll rates across India have already been increased on 1 April 2026. 

While State Government-led transportation could increase the ticket prices a little, private bus operators will jump in! That means train tickets (for summer travel) would get more scarce, especially Tatkal bookings, even as more families would prefer train travel instead of buses or by taxis or personal vehicles. 

Expect a situation where the waiting time for EVs would get longer. Once the prices of fuel go up, more car owners would opt for a new or a second car for the family being an EV; upgrades from hatchbacks will now move towards EVs. 

Luxury cars (priced over INR 75 lakhs) & Premium passenger vehicles (priced between INR 30 - 75 lakhs) would upgrade only for a similar sized EV, with their ICE vehicles’ mileage already low and a disproportionate increase in fuel costs.

With a huge round of job losses recently in IT, Banking, FinTech and BPO looming large in India, several lakhs of people will find it difficult to demand an increment in salaries from their employers as part of revision for FY 26-27.

Are we headed for a recession?

Perhaps not immediately. 

It would take 3 months for Indians to adjust to the increase in fuel prices, with the already-high gold prices. But the shock will settle down in 4-6 months ahead of the festival season beginning August.  

Mind you, however, the fashion industry and Organised Retail - comprising largely apparel, accessories and footwear will take the worst hit over Q2 mostly. 

Brace up for a severe turbulence.

Howdy Slowdown?

Flipkart commenced operations in India about a decade ago. For the FY 2017-18, the Annual T/o of the company was Rs. 24,000 Crores (about US $4 Billion) while Amazon India has a turnover of Rs. 12,000 Crores for the same period. Swiggy earned around Rs. 442 Crores for the previous FY and Zomato added Rs. 1,340 Crores. Industry Leader in the Furniture segment Urban Ladder reported a top line of Rs. 200 Crores for the previous year. Offline Retail Giant Future Group has an annual turnover of Rs. 30,000 Crores across various formats from Grocery to Electronics. Reliance Retail on the other hand has a combined turnover of Rs. 100,000 Crores of which 70% comes from Fuel Retailing and Jio, the data cum telecom company which is part of the retail entity. Ola, the cab hailing company clocked a turnover of Rs. 2,200 Crores while Uber India has an approx. annual turnover of little less than 1,000 Crores last fiscal. Phew.

So, why am I enlisting these turnover figures here?

Because, we are complaining of an Economic Slowdown. FMCG companies, Retailers, Automobile Manufacturers and many other consumer facing companies (and their backend suppliers) have all been complaining of a slowing growth in their businesses. As is the case most often, the Government is being blamed for the mess that we are supposedly in, right now. 

Reliance Retail & the Future Group together account for over Rs. 60,000 Crores which is almost 2% of the total estimated Retail Industry in India (about US $ 500 billion). Add Amazon & Flipkart and the overall business from new channels has increased tremendously over the years. The total pie of the Organised Retail Industry as well as the total consumption market have increased over the past decade and a half from less than 5% to nearly 12% currently. While ITC, Britannia, HUL and others have seen a slide in their sales, remember how Patanjali is raking close to Rs. 10,000 Cr in turnover and is aggressively followed by the likes of Dabur & Himalaya!

E-commerce has played a pivotal role in increasing the overall consumption market in India – selling products online and delivering at the doorstep at the most comfortable time for consumers, service offering (such as booking plumbing & carpentry services) and of course transportation including local mobility as well as ticket bookings across modes of transport. 

While Swiggy and Zomato deliver lakhs of food parcels daily, the restaurants have seen an average 15-20% of their business coming from these channels with a marginal increase in their total business as well. Hundreds of restaurants which were invisible are now able to showcase their products on the Food Delivery Apps and have eventually taken away some of the market share of popular restaurants, thereby curtailing footfalls to restaurants as well as through online orders.

With millions of rides fulfilled everyday by Ride hailing apps in India, have you ever seen an Auto Rickshaw driver starving off business? In fact, thousands of new Autos have been sold. New companies like MG Motors & Kia have set up plants and newer models are outselling older versions. Just that the outdated models like i10 and Indica don’t have any takers. Fortuners, XUV500 & Audis and Beamers aren’t selling short anymore! 

The overall consumption market hasn’t shrunk, rather newer channels and opportunities have opened up. The turnover numbers in the first paragraph are to showcase how much new business has been added over the past decade. The slowdown is more in our minds and a measured approach towards over-spending, which is anyway an inherent way of living.  

And btw, the headline has nothing to do with the so called “Economic Slowdown” but the Indian PM is addressing an event in the US this weekend and the name of the event is “Howdy Modi”, so I thought I would use it to entice my readers.

J for Jacking up Prices

Worldwide, it’s a common practice for Retailers to increase the “Selling Price” of products and then offer a huge discount to Customers. This works well in most countries where there is no MRP regime – Maximum Retail Price. MRP is fixed in certain countries like India and even has an Act passed by the Parliament. According to the MRP Act in India, any product that has been packed and sealed must carry an MRP – a price that’s the maximum fixed for that product. The manufacturer or the seller is free to fix the price but there are a lot of governance issues around this. For example, a product that has to be sealed must go through certain formalities with various Government Departments. Although prices keep fluctuating from time to time, especially for essential items such as Grocery, the Retailers can keep changing the price but after prior information to the concerned Government Authorities.

A packed product could mean a premium shirt from Louis Philippe or 1 kg of Rice or Atta and everything in between. This applies for Cars, Bikes, Consumer Durables, Alcohol, Packaged Drinking Water and almost everything that can be packed and sold. However, there are exceptions for Fruits & Vegetables, Meat, Flowers, etc. which are not covered under the MRP guidelines. Therefore it is quite common to see Organized Retailers playing around with the F&V category which is not only demand & supply dependent, but also on various other external factors such as a Traders strike or a Truckers strike.

Small Retailers, especially the semi organized ones do not follow the MRP guidelines strictly. I had an experience just yesterday at a premium Toy Shop in Chennai. Being summer time with holidays for kids, I visited the shop to pick some board games and toys for my kids. There were items which were pegged at high discounts – 30% - 50%. But most of these items didn’t have an MRP. It seemed most of these items were being imported by the Retailer directly from the Manufacturer or an International source. And therefore had the liberty to adjust the prices. Interestingly, the law allows Retailers to do so. The prices can be arbitrarily changed for most products (except alcohol which is governed by the State in TN) by the Retailers and hence the practice of “jacking up prices” is quite common during such times.

While there was no real discount to the customer, it was a sort of a “made-up” discount that the Customer is expected to perceive as a value offering. With the increasing availability of products, customers are quite aware of such malpractices and have taken the Retailer/Seller to the courts. One such recent example was how a consumer in Hyderabad won a case against INOX multiplex for selling Drinking Water above Market Prices although with a different price printed on it. The Court was of the view that the same product cannot be at different prices in different locations and the Customer won hands down.

So how does the Retailer manage to still offer huge discounts (especially to match online prices) and still be profitable? Indeed, it’s a tough call. With markets still in a limbo, it has been a challenge for Retailers to survive but they come up with various tactics such as product diversification or even a new format. Some have pulled down their shutters but the show goes on.