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Published: November 1, 2023
Updated: November 1, 2023

India's Festive Season Spending Surge Fuels Economic Growth

India is witnessing a remarkable surge in festive season spending, with consumers indulging in purchases ranging from cars and smartphones to televisions. This spending spree is playing a significant role in boosting the growth of one of the world's fastest-expanding economies.

The Festive Sales Frenzy:

Sales at online platforms such as Amazon and Flipkart have surged by nearly 20% during the first week of the festive sales compared to the previous year. Digital transactions, as recorded by the Unified Payments Interface, have witnessed a remarkable 40% increase in October year-over-year.

The Indian festive season typically spans several weeks leading up to Diwali, a major Hindu religious holiday. During this time, millions of Indians engage in a frenzy of shopping, gift- giving, and home improvements. These sales serve as a vital indicator of the health of India's consumption, constituting approximately 60% of the country's Gross Domestic Product.

Economic Factors Behind the Boom:

Economists attribute this spending boom to various factors, including easing inflation and rising wages, particularly in rural areas where a significant portion of the population resides. Consumer confidence reached a four-year high in September, according to central bank data. Despite interest rate hikes, the demand for bank loans is near a 12-year high.

The Indian government, led by Prime Minister Narendra Modi, is also offering support to farmers ahead of elections. This support includes higher guaranteed prices for certain crops and control over cooking gas costs.

Positive Projections:

Economists at Quanteco Research noted that both urban and rural consumption are entering the festive season on a much stronger footing. The continuing fiscal support directed toward rural areas ahead of elections could further bolster consumption in the sector.

This surge in spending is driving manufacturing activity in India and supporting a growth rate of over 6% in the current fiscal year ending in March. The International Monetary Fund predicts that India's economy will continue to grow at a rapid pace, with 6.3% growth projected for 2023 and 2024.

Strong Business Momentum:

Consumer businesses are reporting robust sales, and banks like Axis Bank Ltd. are betting on increased business momentum in the coming months. Reliance Retail also noted strong shopping activity during recent festivals.

Beyond the festive season, consumption is expected to receive a boost from the Cricket World Cup and the upcoming wedding season. The cricket tournament is being hosted in various Indian cities, and it's estimated that it could add $2.6 billion to the economy as fans spend on travel and dining out. The wedding season, from November 23 to December 15, is expected to result in $50 billion of spending on items like gold jewellery, clothing, and other consumer goods.

The festive season's spending surge, coupled with positive economic factors and upcoming events, is driving India's economic growth. Online sales and digital transactions are thriving, and various high-frequency indicators paint a positive picture of strong consumption. The outlook remains bright, with expectations of continued growth in the Indian economy.