Online marketplaces Amazon.com Inc. and Walmart Inc.-owned Flipkart saw sales jump 27% year over year to $5.7 billion in the first sale of the festival season between Sept. 22-30, it estimates Consulting firm RedSeer. Traders estimate in-store spending at around Rs. 2.5 trillion ($30.2 billion).
This year’s Diwali, the October 24 festival of lights and the western equivalent of Christmas, will be India’s first festival season without virus-related restrictions since the pandemic began. The return of shoppers will boost consumption, the backbone of the economy.
Here are four charts to help explain the broader consumption trends:
BloombergNew car sales rose 57% year-on-year during the nine-day “Navratri” period that precedes Diwali, data from the Federation of Automobile Dealers Associations showed. Two-wheeler sales in India, an indication of rural demand, rose 3.7% from 2019 levels. According to the Society of Indian Automobile Manufacturers, September sales of cars and SUVs grew 92% year over year.
India’s largest automobile manufacturer Maruti Suzuki India Ltd. saw a 20% year-over-year increase in demand for its cars, led by its premium offering. “Growth numbers have been consistent across both urban and rural centers,” said Maruti executive director Shashank Srivastava, with higher interest rates doing little to dampen demand.
As the demand for goods increased, companies increased their capacity. According to the Reserve Bank of India, the total flow of finance from banks and non-banks to the commercial sector increased almost five-fold to Rs.9.3 trillion between April and September, up from Rs.1.7 trillion a year ago. “Non-oil and non-gold imports remained resilient, suggesting a continued pickup in domestic demand.”
Good monsoon rains and the lifting of pandemic restrictions accelerated economic activity in agriculture, services and small and medium-sized enterprises. This was accompanied by a drop in the unemployment rate in September to its lowest level in more than four years.
Rural recovery is also helping consumer companies normalize their pricing strategy. At Haldiram’s, one of India’s leading snack food manufacturers, the category ratio between small packs and family packs returned to 70:30, “reflecting that rural areas are also buying,” said AK Tyagi, the company’s chief executive. “Gift packages are in huge demand.”
With the signs of economic recovery and the normalization of income levels, Indian households expect higher spending, according to RBI surveys. Much of this spending is on buying basic necessities, which have become expensive in recent months due to supply-side shocks. But overall consumer confidence also remains buoyant, suggesting a greater willingness to spend on discretionary spending.
“For the first time in three years, this festival season has seen robust demand,” said Gaurav Kapur, chief economist at IndusInd Bank. “Since the beginning of the year, people have been spending goods and services, visitors to shopping centers are increasing, airline seat occupancy has skyrocketed despite high ticket prices.”
