India’s economy lighting up on peak festive season demand
Indian shoppers are back in force online and in stores, splurging this festive season after the coronavirus pandemic dampened celebrations and consumption in previous years.
Online marketplaces Amazon.com and Walmart-owned Flipkart saw sales jump 27 percent from a year ago to US$5.7 billion (S$8.13 billion) during the festive season’s first sale period between Sept 22 and 30, consulting firm RedSeer estimated.
Traders estimate spending of about 2.5 trillion rupees (S$43 billion) at stores.
This year’s Diwali, the festival of lights that falls on Oct 24 and the equivalent of Christmas in the West, will be India’s first season of celebration without virus-related restrictions since the pandemic began.
The return of shoppers will serve as a boost to consumption, the backbone of the economy.
India’s largest carmaker Maruti Suzuki India saw demand for its cars rise 20 percent year on year, led by its premium offering.
“The growth numbers have been uniform in both urban and rural centres,” said Maruti’s executive director Shashank Srivastava, with higher interest rates doing little to suppress demand.
As demand for goods rose, businesses ramped up capacity. Total flow of financial resources from banks and non-banks to the commercial sector jumped nearly five-fold to 9.3 trillion rupees in the April-September period, from 1.7 trillion rupees a year earlier, according to the Reserve Bank of India (RBI).
“Non-oil non-gold imports remained resilient, indicating sustained revival in domestic demand,” it said.
Good monsoon rains and the withdrawal of pandemic restrictions accelerated economic activity in agriculture, the services sector, and in small and medium-size enterprises.
That was accompanied by a drop in the jobless rate to the lowest in more than four years in September.
The recovery in rural areas is also helping consumer firms to normalize their pricing strategy.
Haldiram’s, one of India’s top snack-makers, saw the category ratio between small packs and family packs return to 70:30, “which reflects that rural areas are also buying”, said AK Tyagi, the company’s executive director. “Gift packs are seeing tremendous demand.”
With the economic recovery taking shape and normalizing income levels, Indian households expect to spend more, according to RBI surveys.
Much of this spending is to buy essentials, which in recent months have turned costly due to supply side shocks.
But overall consumer confidence also remains buoyant, indicating greater willingness for discretionary spending.
“For the first time in three years, this festival season is seeing robust demand,” said Gaurav Kapur, chief economist of IndusInd Bank.
“Since the start of the year, people are spending on goods and services, mall footfalls are increasing, airline seat occupancy rates have jumped despite high ticket prices.”