Come October and India readies itself for two of its biggest festivals - Durga puja/Dussehra and Diwali. Maybe, this year Diwali or Durga puja won’t be about bursting crackers like in the past or hopping pandals and meeting friends and families to exchange greetings. It will be virtual and about being there and celebrating the spirit of festivals.
The pandemic has changed the way of celebration but the soul of festivals is hard to be altered. For, festivals are an animated way to celebrate a nation’s heritage, culture and traditions. Festivals play an important role to add structure to our social lives and connect us with our families and traditions. They allow us a diversion from our exhausting daily routines and give us an opportunity to mingle with our culture and society.
All festivals are cultural in one way or another. There are many kinds of cultural festivals including national, religious and seasonal. They all serve the purpose of bringing togetherness to our lives and strengthen our sense of community. Festivals help us to teach principles and ethics to our next generations. All different religious festivals bring the same message of love, tolerance and understanding.
Economic impact of festivals
But a festival not only has a huge impact on the social and cultural environment of a country, it also has a huge impact on the economy. All over the world, consumer sentiments and religious beliefs, often underlying festivals, play an important role in the economic activities of buying and selling of goods and services.
Durga puja, Diwali, and their preceding weeks are traditionally a period of heightened consumption and investment in India. Demand and sales during this period are often seen as a barometer of the vitality of business and the economy.
These festivals especially benefit several sectors and businesses. Around this time of the year, sales of textiles, automobiles, consumer durables, electronic goods, jewellery, real estate and food picks up. The tourism sector also sees growth since holidaying to different destinations is common during Durga puja and Diwali.
Even the unorganised sector benefits during festivals. Artisans, who mostly reside in rural areas, see significant growth in their sales with greater employment as a cascading effect. The youth of new India are now using and promoting mostly products made in the country, especially during festivals, which directly impacts the unorganised sector. The artisan industry is the second largest employer in developing nations after agriculture and employs women in large numbers. Their earnings go up during the festival season.
Festivals’ economic impact across the world is too big to ignore. According to a study by Indian Statistical Institute faculty Atanu Biswas titled, ‘The Durga puja challenges in the days of epidemic’ published in the Statesman on June 26, 2020, ‘Hanami’ contributes about 2.25% to the economy of Japan, the ‘Mardi Gras’ festival in New Orleans in the US contributes slightly more than 1.5% to the city’s GDP and ‘Oktoberfest’ contributes slightly more than 1.35% of Munich’s economy.
Back to India, an Assocham report in 2013 estimated the size of the Durga puja industry in West Bengal at `25,000 crore and it was rising at an annual compound rate of about 35%. With that growth rate, the estimated size of the economy of Durga puja in 2019 was nearly `1.5 lakh crore, and that could reach `2 lakh crore in 2020 under normal circumstances. And that’s more than 10% of West Bengal’s GDP.
There are about an estimated 28,000 community pujas in West Bengal. The number of Durga pujas in Kolkata alone is about 3,000. The expenses for pandals range from a few hundred thousand to tens of millions - corporate funding and outdoor advertising account for about 90% of the funding.
Most of the puja organisers have decided to cut their budgets this year. It will have a cascading impact lower down – hundreds of people involved in the puja process would lose their earnings. As a result, it must be a very delicate call for the administration to take a decision on the festivity of Durga puja in this pandemic year. There has to be a balance in the trade-off between economy and public health.
There are hundreds of idol-makers, craftsmen, dhakis, small shopkeepers, transport operators and many others who earn major parts of their yearly income out of this festivity. These people would prefer the festivity to take place. On the other hand, while the spread of the coronavirus epidemic continues to plague the state, it will be a tough call to allow the puja to take place - considering the crowd it pulls.
The West Bengal government has described organising Durga puja festivities this year as a “big challenge” amid the Covid-19 crisis and advocated erecting open pandals as a precautionary measure to contain the virus spread. Indeed, most of the puja organisers have cut their budgets and have decided to organise the festivity in a smaller scale with adequate precautionary measures.
Consumer sentiment improves
Apart from Covid-19, the festival season this year has another big challenge in decelerating macro numbers. And if the fall in private final consumption was a prime reason for India’s GDP deceleration in the first quarter of the current year, the imminent festival season – October and November – will be crucial in understanding the depth and sectoral nuances of the weakness. Private final consumption, which is one of the strongest propellers of India’s GDP growth, declined by 26.7% during April-June 2020 compared to the same period a year ago. For sectors such as automobile, consumer durables, garments and tourism - these two months, peaking with Diwali, traditionally account for 25-35% of annual sales. It is this critical sales window that is now under threat.
YouGov conducted a survey in August 2019 to sense the excitement of people about Diwali shopping and to evaluate consumer sentiments about ongoing promotional offers. The survey estimated that in the 2019 festive season, 31% of consumers wanted to spend on gadgets and 42% on clothes.
And this actually had happened. The Diwali sales had surpassed its earlier record last year despite an ongoing economic slowdown. E-commerce companies comprising the likes of Flipkart, Snapdeal and Amazon sold goods worth `19,000 crore ($3 billion) during the six-day festive sales last year, according to RedSeer Consulting, a management consulting firm headquartered in Bangalore. The report further claimed that the entire festive month up to October-end garnered about `39,000 crore ($6 billion) in gross merchandise value sales. The report also stated that there was a 30% increase in combined festive sales of Amazon and Walmart-owned Flipkart in terms of gross merchandise value in 2019 compared to what they generated in 2018.
Based on these findings, India is hoping for a repeat performance this year too - the economic slowdown notwithstanding. Maybe, the mode of marketing would shift in favour of e-commerce in a bigger way this time around as a large section of the buyers would want to avoid direct purchasing in malls and open markets. The number of online shoppers in India will nearly double to around 50 million during the festive season this year, according to RedSeer. Of these, about half will be from tier-II cities and beyond. In 2019, there were 28 million e-tailing customers. This is despite the fact that the pandemic has severely hit the Indian economy and there have been large scale layoffs across several industries.
In fact, following the phase-wise unlocking and resumption of economic activities, the consumer sentiments have begun improving. In its study conducted between August 4 and 8, Deloitte India reported that consumer anxiety around finances, health, spending, and mobility was down to 36% from the 41% reported in April.
Even Boston Consulting Group’s latest survey conducted between July 20 and August 2 noted a pick-up in routine activities with 53% consumers saying that they have been going out to work and 66% of them admitting that they have been visiting friends. These figures were 15% and 10% respectively in the last round conducted during May 18-23. According to the survey, consumer sentiment is starting to improve slightly though the pandemic has continued to worsen.
More recently, research firm Mintel India also in its ‘Global Covid-19 Tracker’ in August said 42% of Indian consumers are looking forward to meeting family and friends in person compared to 34% in early July. This desire has accelerated because of the onset of the festive season.
Higher festival sales projected
With a steady monsoon and generous harvest so far, India is hopeful that the festive season will bring cheer for the industry. The improvement in consumers’ sentiments of late has strengthened such prospects. To add to it, multiple sectors affected by a slowdown have now deployed their own tools to push sales. Discounts and deals as well as special loan offers are on the cards.
The festive season in India begins with Navratri, which starts on October 17 this year and continues till the end of the year. As per various estimates, around two-fifths of all apparel, consumer durables and electronics sales in the country happen during this period. To tap into this demand, e-commerce players such as Amazon and Flipkart hold massive sales that include new launches and deep discounts.
This year’s bonanza sales will gain from the Covid-driven adoption among shoppers from tier 2 and 3 cities. The rise of new models like video and WhatsApp-based shopping will become main-stream as companies try to serve their clients better.
This is expected to see a massive growth in online shoppers as consumers would now want to shop in a manner that is convenient, safe and hygienic and the e-commerce space meets these requirements.
Collections from the first round of festival sale this season is expected to see an increase of 50% over the collections recorded in the corresponding period last year, as per the Redseer study titled ‘The Festival of Firsts Online Festive Sales 2020 Forecast’. According to the study, “The online festive sale has always been an important indicator of India’s ecommerce growth story with last year’s festive sale being the biggest so far.”
Aggregate festive sales are expected to almost double this year to a huge $7 billion in gross merchandise value compared to $3.8 billion in the same period last year, according to the RedSeer report. Based on the strong festive sales performance, e-commerce is expected to reach $ 38 billion in sales in calendar 2020 from $ 27 billion in 2019.
Big-ticket sales uncertain
But while merchandise sales are expected to double in this festive season, bigger purchases like automobiles or houses that also happen during the festive season, continue to be at the far end of the consumers’ discretion spectrum. The fall in interest rate and the subsequent decline in EMI amount have failed to prop up demand so far and both the sectors are now awaiting sops from the government. There were favourable noises recently about GST sops to the auto industry and some easing for the real estate sector. Sales during the festive season this year will depend largely on how effective the government stimulus package is. A beginning has been made with announcements by the finance minister but the actual impact measured in terms of enhanced liquidity-creating scenario where potential home buyers make the move from being fence sitters to acting as actual buyers during the festive season remains to be seen.
The automobile industry is hoping that the August and September slowdown will end in October. All automobile and two-wheeler companies are hopeful of pushing stocks with higher discounts and incentive schemes during the festive season. This may actually happen if the government, as hinted recently, heed to the automobile industries’ recommendation for a reduction in GST rates by 10% across all categories of vehicles. Likewise, the festive sale of the real estate sector may take an upturn if the government comes out with newer sops. Among others, the real estate sector is demanding to extend the definition of “affordable housing” to homes costing up to `75 lakh as against a maximum of `45 lakh right now. This will possibly increase their reach to a larger number of buyers.
At the other end, gold jewellers in India are pinning hopes on the upcoming festival season, with dealers offering discounts to lure customers back. Gold prices are ruling at an all-time high and given the economic uncertainty, its demand has declined substantially during the post- coronavirus days. This is reflected in the sharp fall in gold import. India’s gold imports have declined over 81% to reach $2.47 billion during the April-July period of 2020-21 due to a significant fall in demand in the wake of the pandemic. Jewellers are hopeful that the festival season will bring back customers.