With customers splashing out on TVs, cellphones, and vehicles during India’s Christmas season, one of the fastest-growing economies in the world is seeing strong growth. This essay explores the main causes of this spending binge and its effects on several Indian economic sectors.
Festive Season Sales Surge
India’s Festive Season, Compared to the prior year, sales on online retailers like Amazon and Flipkart increased by about 20% during the first week of the holiday season. In October, the Unified Payments Interface saw a notable 40% increase in digital transactions compared to the same month last year. With Diwali marking the end of a multi-week celebration that accounts for about 60% of the country’s GDP, India’s holiday season is a crucial barometer of the health of the country’s spending.
Factors Fueling the Spending Spree
Several factors are contributing to the surge in festive season spending:
Easing Inflation: A reduction in inflationary pressures is making products more affordable for consumers.
Rising Wages: Particularly in rural areas, where a majority of the population resides, an increase in wages is boosting disposable income.
Consumer Confidence: Consumer confidence reached a four-year high in September, and demand for bank loans is near a 12-year peak, despite recent interest rate hikes.
Government Initiatives: Prime Minister Narendra Modi’s government has introduced measures targeting farmers, including higher guaranteed crop prices and reduced cooking gas costs.
Impact on the Economy
India’s manufacturing sector is expanding due to increased consumer spending, which is sustaining a growth rate of more than 6% for the current fiscal year, which ends in March. India’s economy is expected to develop at the quickest rate among major economies, 6.3% in both 2023 and 2024, according to the International Monetary Fund.
While consumer-oriented firms are reporting higher sales, banks such as Axis Bank are forecasting higher business momentum in the upcoming months. Strong sales were also recorded by Reliance Retail during the most recent festivals.
Future Drivers of Consumption
Apart from the ongoing festive season, consumption is expected to receive additional boosts from the Cricket World Cup and the upcoming wedding season:
Cricket World Cup: The ongoing cricket tournament is expected to inject an estimated $2.6 billion into the economy as fans spend on travel and dining out.
Wedding Season: From November 23 to December 15, the wedding season is predicted to drive $50 billion in spending on items like gold jewelry, clothing, and other consumer goods.
Credit Availability and Cooling Inflation: Easy access to credit and expectations of reduced inflation are expected to further support discretionary spending, particularly in the mass market.
During the holiday season, mobile phones, electronics, and big appliances accounted for a significant amount of the 47 billion rupees in online sales. Digital transactions through UPI increased significantly, and credit card payments increased as well.
The robust spending trend is supported by other economic measures, such as peak electricity demand and the collection of goods and services taxes. In order to fulfil the increasing demand for goods like washing machines, LED televisions, and mobile phones, manufacturers are increasing their capacity.
India’s spending bonanza during the holidays is propelling economic expansion in addition to increasing consumption. The Indian economy, which is among the fastest-growing in the world, is well-positioned for future growth because to a robust and self-assured customer base.