What led to unexpected surge in India's festive season spending?
What's the story
India's festive season has seen an unexpected surge in spending and consumption, much to the surprise of various industries. The unexpected spike in demand has left many sectors struggling to keep up. This unprecedented wave of consumer activity is still going strong, continuing to fuel the country's economic growth this year.
Economic conditions
Factors driving the consumption surge
Several factors have contributed to this year's festive spending surge. Inflation has hit an eight-year low at 1.5%, while government GST cuts have reduced indirect taxes on most goods and services, encouraging public spending. Additionally, rising gold prices have increased the value of Indian household gold to $3.9 trillion, further boosting consumer purchasing power during the festive season.
Consumer issues
Consumer challenges during the festive season
Despite the boost in spending, many consumers have faced challenges. A Local Circles survey found that nearly 60% of those who shopped through eCommerce or quick commerce platforms this festive season received wrong or defective items that couldn't be returned. This highlights some of the difficulties consumers have encountered amid the surge in festive spending and consumption.
Economic impact
GST cuts impact on consumer spending
The recent GST cuts, dubbed GST 2.0, are believed to have played a major role in the surge of consumption. HDFC Mutual Fund estimates these cuts have given households ₹2 lakh crore in savings that they could spend on goods and services. This has significantly contributed to the unprecedented rise in festive season spending across various sectors of the economy.
Supply challenges
Industries struggling to keep up with demand
The festive season's demand surge has left many industries, from automobiles to edibles and appliances, struggling to keep up. There are long waiting lists for premium TVs, washing machines, refrigerators, and dishwashers. Many retailers have already run out of chocolates, soft drinks, biscuits, and other snacks, especially in large packs, due to the unprecedented consumer demand during this festive period.