Ad industry eyes recovery in new FY, but Trumponomics looms

The advertising and media industry is cautiously optimistic about a recovery in the new fiscal year, driven by positive trends like softening inflation and improved GDP growth. However, looming trade tensions, particularly the US government's proposed tariff hikes, threaten to derail this momentum, industry experts say.

India's market currently exhibits all signs of improvement. Moody's Ratings recently predicted that India's economic growth would exceed 6.5% in the upcoming fiscal, up from 6.3% this year, fuelled by higher government capital expenditure, tax cuts, and monetary easing.

Retail inflation, which impacted both rural and urban consumption over the last few quarters, eased to a seven-month low of 3.61% in February, down from 4.31% in January, according to government data. Rural inflation cooled to 3.79% compared to 4.59% in January, while urban inflation stood at 3.32% versus 3.87% the previous month.

Food inflation, which constitutes nearly half of the Consumer Price Index (CPI) basket, fell to 3.75% in February from 5.97% in January—a positive sign for an industry heavily reliant on the FMCG sector. Vegetable inflation too has contracted to 1.07% year-on-year, down from 11.35% in January.

Positive Indicators vs. Global Trade Uncertainty

These indicators are expected to kickstart momentum in the advertising and media industry. However, US President Donald Trump's plans to impose reciprocal tariffs—raising import taxes to match those levied on US goods by other countries, starting April 2—pose a potential disruption to global markets, already grappling with economic headwinds.

The impact of these tariff changes on India’s exports to the US could be significant, given that the US is a major market for Indian goods. Despite these concerns, ad executives anticipate that advertisers, particularly in the Fast-Moving Consumer Goods (FMCG) sector, are set to ease spending restrictions from the April-June quarter. Notably, FMCG accounts for one-third of India’s total ad spend.

Top FMCG players like Hindustan Unilever (HUL) and Dabur had scaled back their ad spending in the December quarter due to rising input costs and softening demand.

“With the improving economic outlook, ad spends are likely to pick up. Ideally, FY26 is likely to witness a 6-7% growth in advertising expenditure (AdEx), barring any market disruptions from Donald Trump's new tariff regime,” various ad executives told e4m.

However, Anil Solanki, Senior Director, Media Lead, DentsuX, has a different point of view. He foresees stronger growth, “We expect overall ad expenditure to grow by approximately 10-12%, with digital maintaining its stronghold, driven by performance marketing, influencer collaborations, and video-led content.”

Sluggish Market So Far

Notably, AdEx remained flat in the outgoing FY25, influenced by factors such as the Lok Sabha elections and weakening demand. Even the festive season, which coincides with the third quarter, failed to deliver significant gains for most advertisers. HUL, for instance, reduced its ad spending by 14.8% year-on-year in Q2 and 7.3% in Q3 2025. 

The Pitch Madison Advertising Report (PMAR) projected a 12% growth in India's AdEx for 2024, reaching Rs 1.11 lakh crore. However, the actual figure stood at Rs 1.08 lakh crore, per the latest PMAR. The report now forecasts an 11% rise, taking AdEx to Rs 1.2 lakh crore by the end of 2025.

However, the market has been sluggish so far. “In the Jan-Dec quarter last year, we saw a slowdown, and that trend has carried into the first quarter of this year. However, it’s better than the last quarter,” says Jai Lala, CEO of Zenith.

“One key reason is the FMCG sector, a major player in our industry, facing challenges in demand and input pricing. Though the budget has been announced and the government is taking steps, increased FMCG brand spending is crucial for market recovery,” Lala said.

Another challenge, he notes, is the slowdown in startup ad spending. “Startups have significantly reduced their marketing budgets in the last few quarters. If some major startups invest in IPL, the industry could gain momentum.”

While BFSI and EdTech typically ramp up spending in Feb-Mar, and several brands try to exhaust budgets by year-end, this hasn't been enough to lift the market, another media agency CEO said, requesting anonymity.

“FY25 has been a mixed bag for the advertising industry,” Solanki adds. “While digital continued to see double-digit growth, traditional media, particularly print and radio, faced challenges due to changing consumption habits. Television remained stable, with IPL and election-related advertising playing a key role.”

IPL as a Key Indicator

The IPL is a critical barometer for AdEx growth, with the upcoming season set to begin on March 22.

“All eyes are on IPL, as its performance often sets the tone for the year. With significant investments at stake, IPL’s ad revenue will be a crucial market indicator,” says Lala.

The industry also anticipates a boost from the government's infrastructure development initiatives. “The focus on infrastructure and rural growth should drive spending in these areas, benefiting the ad industry,” says another expert.

Key Categories to Watch

Higher consumer confidence typically translates to larger marketing budgets, with brands eager to capture demand, says Krishna Iyer, Director of Marketing at MullenLowe Lintas Group.

“Digital-first sectors like e-commerce, fintech, and EdTech will ramp up ad spend, while travel and hospitality will capitalise on seasonal demand and events like the Mahakumbh. Meanwhile, digital will continue to dominate, as traditional media—especially print and radio—loses share,” Iyer notes.

According to Solanki, “Automotive, BFSI, e-commerce, and FMCG will continue to be the biggest contributors to ad growth, with auto brands launching new models and BFSI brands leveraging digital media for customer acquisition. Real estate is also seeing increased ad spends in key metro cities. However, discretionary categories like luxury and premium electronics may remain cautious due to demand fluctuations.”

Will Startups Return to Aggressive Spending?

The startup ecosystem, a key driver of ad growth in recent years, has faced funding constraints this fiscal. According to Tracxn data, Indian tech startups raised $11.3 billion in 2024, up 6% from 2023 but still 56% below the $25.4 billion raised in 2022.

This has had a direct impact on India’s ad sector. “Startups are becoming more ROI-driven in their ad spends, focusing on digital performance marketing rather than large-scale brand campaigns,” says Solanki.

However, he adds, “If investor confidence strengthens in the next few quarters, we could see startups returning to aggressive marketing by late FY26, particularly in fintech, edtech, and D2C brands.”

The Trump Factor

Trump’s trade war poses a major challenge to the US economy, with economists warning of higher prices, slower growth, and job losses. The ripple effect could impact India’s economy and advertising sector as well.

“Some categories might feel the impact, while others may remain unaffected,” says an ad industry leader.

India's exports have already felt the effects of potential US tariffs, according to Reuters. Citi Research estimates India's merchandise exports to the US reached nearly $74 billion in 2024, driven by jewelry, pharmaceuticals, and petrochemicals. However, India's import tariffs remain significantly higher, averaging 11% in 2023—8.2 percentage points above US tariffs on Indian goods.

Morgan Stanley analysts predict that India could face tariff hikes of 4-6 percentage points, with Citi Research estimating potential annual losses of $7 billion. Sectors like automobiles, food products, pharmaceuticals, jewelry, and chemicals are particularly vulnerable.

“Our fingers are crossed. The first quarter of FY26 will be crucial for several reasons,” say industry leaders.