India's post-Diwali spending stays strong, digital payments continue to rise
What's the story
India's consumption pattern seems to be holding strong even after the Diwali rush, with digital payments showing no signs of the usual post-festival slump. According to Reserve Bank of India (RBI)'s data, daily spending through Unified Payments Interface (UPI), cards, and wallets in November has surpassed October levels. This trend raises questions about whether it's a continuation of festive buying or an indication of a shift in consumer demand after months of caution.
Spending surge
Digital spending averages ₹96,017 crore per day
From November 1 to 21, Indians have spent an average of ₹96,017 crore a day through digital channels. This is higher than the ₹94,385.85 crore in October and the ₹89,675.18 crore in September. The run-rate has been increasing steadily from the previous months of the current year when it was at ₹82,578 crore for October and ₹77,572 crore for November.
Consumption indicator
A proxy for on-ground consumption
Digital payments are often seen as a proxy for on-ground consumption. However, it's worth noting that rising debt repayments and investment flows through UPI also contribute to these figures. In October alone, ₹50,614 crore was paid to debt collection agencies while digital gold purchases accounted for another ₹2,290 crore. Despite this complexity in data interpretation, experts are optimistic about continued growth in December and January due to seasonal spending trends.
Economic outlook
Expert opinions on rising consumption levels
Madan Sabnavis, Chief Economist at Bank of Baroda, says the data indicates a definite increase in consumption. He explains that these transactions typically involve consumer goods such as fast-moving consumer goods (FMCG), durable goods including automobiles to some extent. This view is supported by category-level data showing a significant rise in electronics purchases through UPI and grocery/supermarket spending in October compared to previous months.
Payment trends
UPI dominates digital payments landscape
UPI has emerged as a dominant player in the digital payments space, accounting for 94% of all transactions by value in November. Credit cards still hold strong in e-commerce and high-value purchases, but debit cards and prepaid payment instruments (PPIs) are losing ground to UPI for smaller transactions. Notably, securities brokers and dealers saw ₹66,095.52 crore worth of UPI spends in October alone, an increase from September's ₹49,486.58 crore.