Festival spending India: India’s festival spending booms despite inflation worries, global slowdown

According to early data, Indian consumers are licking up everything from cars, homes and television sets to travel and jewelry during the holiday season that started last month.

Online and offline sales during the Hindu festival period starting in the last week of September and lasting until early November are estimated at $27 billion, almost double the amount in the same pre-COVID period in 2019, and nearly 25% higher than last year, according to industry estimates.

Revenue is said to include nearly $15.2 billion in offline sales, compared to about $8.5 billion in 2019, according to the Confederation of All India Traders (CAIT). This year will also see $11.8 billion in sales on online platforms such as Amazon and Walmart’s Flipkart, according to Redseer, a market consultancy.

Retail sales always peak in October-November, when the country of 1.4 billion people celebrates the major festivals of Dussehra and Diwali. According to Hindu belief, it is also a favorable time of the year to get married.

But the increase this year is much bigger, mainly due to pent-up demand as COVID-19 recedes after two years of devastation to the country, as well as a rise in wages and an increase in jobs as the economy recovers, leaders in the US said. sector.

“After two years of pandemic fatigue, Indian consumers are optimistic for the festivals,” said Sanjay Kothari, associate partner at Redseer, adding that online sales in the first week of the season have increased by almost a fifth compared to last year.

With online buyers quadrupling since 2018 to nearly 200 million, and demand for items such as cell phones and fashion apparel expanding into small towns, these sales are likely to remain strong over the next three months, he said.

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“We hadn’t been out of the city since the COVID outbreak, but decided to have some fun at the festivals this year,” said Manoj Kumar Das, a 53-year-old tea seller in Bhubaneswar, the capital of the eastern state of Odisha. .

Das, who earns about 30,000 rupees ($364) a month, said he spent more than 50,000 rupees on a seven-day vacation this year, in addition to buying new clothes for his family.

Car sales, including those of two-wheelers, rose 57% this month during the nine most favorable days in the Hindu calendar compared to last year, and were almost a fifth higher compared to the pre-pandemic period in 2019, according to the Federation. associations of car dealers.

Home sales in the country’s seven largest cities rose nearly 70% in the September quarter from a year earlier, according to a report by the JLL consultancy, as builders offered festival discounts.

India’s boom comes despite economic challenges elsewhere in the world, with inflation rising in the wake of the Russia-Ukraine war and sharply higher interest rates.

Countries that account for a third of global output are expected to be in recession next year, the IMF said.

In India too, lending rates have risen about 150 basis points since May as the central bank battled consumer inflation, which hit a five-month high of 7.41% year-on-year in September.

But economists said the feeling in India was that inflation had peaked while economic activity was picking up. The increase in consumer demand is expected to support economic growth of about 6.5% in the fiscal year ending March 2023, the highest of the world’s major economies.

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Retailers in the Chandni Chowk clothing and jewelry markets in Delhi, as well as in the states of Uttar Pradesh, Gujarat, Odisha and Kerala, reported a surge in demand, especially in urban areas. Demand in rural areas, however, remained weak due to lower wage growth compared to the cities, traders said, and possibly because of the unusual rain in October that affected crops.

Malav Shah, director of VTech TVS, a chain of six car showrooms in Ahmedabad in western India, said the reopening of educational institutions and the resumption of work in offices have contributed to an increase in demand for cars.

“Vehicle price increases and high petrol prices are challenges, but they have not dampened festive sales,” Shah said.

Spending is also boosted by credit expansion, which the central bank said hit a 10-year high of 16.2% in August as businesses and consumers took out loans to finance investments and purchases.

The retail boom is also a boon for government — tax collections on goods and services, a barometer of consumer demand, rose 26% year-on-year in September, data show.

Praveen Khandelwal, secretary general of the CAIT group representing more than a million retailers, said sales are expected to grow by about 70% compared to the pre-pandemic period as people spend more on clothing, gold and home decor. to celebrate festivals and also to make purchases. for the wedding season.

“Consumer confidence has improved with the expansion of economic activity, and the country should be celebrating festivals after two years without fear of a pandemic,” he said.

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Aditi Nayar, the chief economist at ICRA, the Indian arm of rating agency Moody’s, said the rise in festival sales was partly due to pent-up demand, but could ease early next year.

“After two consecutive gloomy holiday seasons, consumer confidence and spending appear to have recovered this year…which may boost economic growth in the current quarter, but will not last beyond that.”

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