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India’s economy lights up this Diwali after the Covid dampener. why over here

With economic recovery taking shape, Indian households are expected to spend more. (Representative)

Indian shoppers are back online and in stores, tearing apart this festive season after the coronovirus pandemic festering and consuming in previous years.

Consulting firm RedSeer estimates that during the first sale of the festive season between September 22-30, online marketplace Amazon.com Inc. And sales of Walmart Inc-owned Flipkart rose 27 percent to $5.7 billion from a year earlier. Traders estimate that about Rs 2.5 lakh crore ($ 30.2 billion) will be spent on the shops.

This year’s Diwali, the festival of lights that falls on October 24 and is the equivalent of Christmas in the West, will be the first season of celebration in India since the pandemic began without virus-related restrictions. The return of shopkeepers will serve to boost consumption, the backbone of the economy.

Here are four charts that help explain broader consumption trends:

Data from the Federation of Automobile Dealers Associations shows that during the nine-day ‘Navratri’ period before Diwali, there has been a 57 per cent increase in new vehicle sales compared to a year ago. Two-wheeler sales in India, a sign of rural demand, grew 3.7 percent from 2019 levels. According to the Society of Indian Automobile Manufacturers, sales of cars and sports utility vehicles grew 92 per cent in September compared to a year ago.

India’s largest carmaker Maruti Suzuki India Limited saw a 20 per cent year-on-year growth in demand for its cars, led by its premium offerings. Shashank Srivastava, executive director, Maruti, said, “The growth numbers in both urban and rural centers have been the same, with higher interest rates doing little to suppress demand.”

As demand for goods increased, businesses increased capacity. According to the Reserve Bank of India, the total inflow of financial resources from banks and non-banks to the commercial sector increased nearly five-fold to Rs 9.3 trillion between the April-September period, from Rs 1.7 trillion a year ago. “Non-oil non-gold imports remained resilient, indicating a continued revival in domestic demand.”

Good monsoon rains and withdrawal of pandemic restrictions have boosted economic activity in agriculture, services sector and small and medium enterprises. Along with this, the unemployment rate in September fell to the lowest in more than four years.

Improvements in rural areas are also helping consumer firms to normalize their pricing strategy. AK Tyagi, executive director of the company, said Haldiram’s, one of India’s top snack manufacturers, saw the category ratio between small packs and family packs at 70:30, indicating that rural areas are also buying. There is a tremendous demand for gift packs.

According to RBI surveys, with the economic recovery taking shape and income levels normalizing, Indian households are expected to spend more. The bulk of this expenditure is on buying essential commodities, which have become costlier in recent months due to supply-side shocks. But overall consumer confidence also remains, indicating a greater desire for discretionary spending.

Gaurav Kapur, Chief Economist, IndusInd Bank, said, “For the first time in three years, this festive season is witnessing strong demand.” “Since the start of the year, people have been spending on goods and services, malls are crowded, airline seat occupancy rates have soared despite high ticket prices.”

(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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