India is currently witnessing a robust festive season with consumer spending surging on cars, smartphones, and TVs, contributing significantly to the growth of one of the world's fastest-expanding economies.
Rise in Domestic Consumption
The festive season, running for several weeks until the Hindu religious holiday of Diwali on November 12, involves extensive spending on food, gifts, and home improvements. These sales are critical indicators of consumption, which constitutes around 60% of India's gross domestic product (GDP).
Uptick in E-commerce Sales
Online platforms like Amazon and Flipkart have reported a nearly 20% increase in sales during the first week of festive sales compared to the previous year. Online sales from these platforms reached $565 million in the week through October 15. Mobile phones, electronic goods, and large appliances were key drivers, constituting 67% of the sales, according to consulting firm RedSeer.
Digital Transactions Through UPI see 40% Surge in OctoberUnified Payments Interface recorded transactions worth $222 billion from October 1-30, marking an increase of more than 40% from the previous year. Other high-frequency indicators, such as peak electricity demand, goods and services tax collection, and factory capacity expansion, collectively paint a picture of strong consumption trends. |
Boost in Manufacturing Activity
The festive season is also characterized by a boost in manufacturing activity, driving growth of over 6% in the current fiscal year. The International Monetary Fund predicts India's economy will continue this robust growth, with projections of 6.3% for both 2023 and 2024 – the fastest among major economies.
Strong Demand for Bank Loans
Despite interest rate hikes throughout the year, demand for bank loans remains near a 12-year high, indicating sustained economic momentum. Consumer confidence reached a four-year high in September, according to the latest central bank figures.
Looking Beyond the Festive Season
Consumption is expected to receive additional boosts from the ongoing Cricket World Cup and the upcoming wedding season. The cricket tournament, hosted across various cities in India until November 19, is estimated to contribute around $2.6 billion to the economy. The Confederation of All India Traders anticipates that the wedding season, spanning from November 23 to December 15, will result in $50 billion of spending on items like gold jewelry, clothing, and consumer goods.
