India’s economy lights up at peak demand during festive season

Indian shoppers are back in full force online and in stores, splurging this festive season after the coronavirus pandemic dampened celebrations and consumption in previous years.

Online marketplaces Amazon.com Inc. and Flipkart, owned by Walmart Inc., saw sales jump 27% from a year ago to $5.7 billion in the first sale of the season festivals between September 22 and 30, estimated the consulting firm RedSeer. Traders estimate their spending at around 2.5 trillion rupees ($30.2 billion) in stores.

This year, Diwali, the festival of lights that falls on October 24 and the equivalent of Christmas in the West, will be the first season of celebrations in India since the start of the pandemic without virus-related restrictions. The return of buyers will serve as a boost to consumption, the backbone of the economy.

Here are four charts that help explain broader consumer trends:

Bloomberg

Sales of new vehicles jumped 57% from a year ago during the nine-day ‘Navratri’ period before Diwali, according to data from the Federation of Automobile Dealers Associations. Sales of two-wheelers in India, an indication of rural demand, rose 3.7% from 2019 levels. Sales of cars and SUVs soared 92% in September from the previous year. previous year, according to the Society of Indian Automobile Manufacturers.

India’s largest automaker, Maruti Suzuki India Ltd., saw demand for its cars rise 20% year-on-year, thanks to its premium offering. “Growth numbers were even across urban and rural centers,” Maruti chief executive Shashank Srivastava said, with rising interest rates doing little to suppress demand.

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As the demand for goods increased, companies increased their capacity. The total flow of financial resources from banks and non-banks to the commercial sector increased nearly fivefold to 9.3 trillion rupees between April and September, from 1.7 trillion rupees a year ago, according to the Reserve Bank of India. “Non-oil non-gold imports remained resilient, indicating a sustained recovery in domestic demand.”

Good monsoon rains and the removal of pandemic-related restrictions have accelerated economic activity in agriculture, the service sector and small and medium enterprises. This was accompanied by a drop in the unemployment rate to the lowest in more than four years in September.

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The recovery in rural areas is also helping consuming businesses normalize their pricing strategy. Haldiram’s, one of India’s leading snack makers, saw the category ratio of small packs to family packs return to 70:30, “reflecting that rural areas are also buying,” AK Tyagi said, executive director of the company. “Gift sets are in huge demand.”

With the economic recovery taking shape and income levels normalizing, Indian households expect to spend more, according to RBI surveys. Much of this spending is on basic necessities, which have become expensive in recent months due to supply-side shocks. But overall consumer confidence also remains buoyant, indicating greater willingness to spend discretionarily.

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“For the first time in three years, this festival season is seeing strong demand,” said Gaurav Kapur, chief economist at IndusInd Bank. “Since the start of the year, people have been spending on goods and services, shopping mall footfall is increasing, airline seat occupancy rates have surged despite high ticket prices.”

Carol N. Valencia