HSBC Forecasts $30-40 Billion Annual Boost In Non-Essential Purchases, Discretionary Consumption To Increase

HSBC Global Research has forecasted an increase in discretionary consumption in India, projecting an annual boost of $30–40 billion over the next 18-24 months. This surge, representing roughly 10-15% of total discretionary spending, is expected to be driven by several key factors.

According to the brokerage, the anticipated increase in discretionary consumption will be fuelled by tax cuts in FY26, the implementation of the 8th Pay Commission in FY27, and lower interest rates and inflation.

Reduced personal tax rates from FY26 onwards will save taxpayers a total of $12 billion. The 8th Pay Commission, assuming a 15% hike in salary, could result in an additional incremental income of $18-26 billion for public sector and defence employees, according to the brokerage. "Although some of the extra income could be saved or invested, we think most will go towards consumption," HSBC noted.

Lower interest rates, projected to decrease by 75-100 basis points, are expected to save $3-4 billion on mortgage payments alone. "Lower inflation would offer further upside to this savings," the report adds.

While the near-term outlook (6-9 months) lacks significant triggers, HSBC remains optimistic about the medium-term prospects. "Our thesis plays out over 18-24 months, and the near-term outlook lacks triggers or significant pickups in activity," the report acknowledged.

HSBC also commented on the recent earnings performance, noting that fourth quarter earnings traction was better than feared, despite a 5% downward revision in market earnings for fiscal 2026. "4QFY25 wasn't as bad as feared, though earnings growth continued to slow," the report stated. In the broader market, 61% of the top 500 listed companies in India beat EPS estimates in the fourth quarter, marking an improvement over the previous two quarters.