The festival season is here. India celebrates its two biggest festivals, Durga puja and Diwali, during October-November. While for the larger part of the country, festival spirits are flagrant around the Diwali, in Bengal, it starts with the Durga puja. With the Durga puja having been inscribed on the UNESCO representative list of intangible cultural heritage of humanity recently little wonder that Bengal has gone overboard about the Durga puja celebration and the carnival.
India is the land of festivals; it celebrates festivals almost throughout the year. Festivals are a significant part of Indian culture, acting as a vehicle for promoting India’s values and emotions. While each community and each region has its own festivals, two of its biggest festivals; Durga puja and Diwali cut all boundaries and are celebrated across India and across religions.
The importance of festivals, however, goes much beyond the social and cultural integration or promoting values and emotions of a country as it has a huge impact on the economy. In India, where big expensive decisions are often religion-driven due to faith and tradition, festivals act as the perfect ground for big consumer spending.
In fact, festivals like Diwali are primarily based on religious sentiments and are considered by the traders as auspicious moments to offer puja at their shop and open new accounts. The farmers are seen to swarm their shops with their newly harvested crops. This is the time when new products are launched and special sale offers are made by corporate and companies, all with an aim to expand market presence.
The economic impact of festival
When we think of an economic stimulus, we usually think of increased public spending or monetary easing. But there’s another kind of stimulus that is not announced as one: Festivals. Festivals create a substantial economic boom, generating increased consumer spending, promoting tourism, and supporting various industries. 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.
As it is the demand for dress materials, consumer durables, electronic goods, jewellery and even big ticket items such as real estate and automobiles picks up during the festival times. The middle class save their money to spend during festivals and service holders get a bonus for extra spending during the festive season. The tourism sector also sees growth since travelling to different destinations is common during Durga puja and Diwali. Educational institutes and a large number of offices remain closed during the puja time allowing people to holiday and in turn, boosting the tourism industry.
Retail is widely understood to be the primary driving force behind financial activity during the festival season, contributing to a chunk of the total business. The biggest beneficiaries of the consumption boost are the big and organised marketers, which began attracting consumers with freebies, discounts and innovative advertisements a long before the festive season actually starts. But if sales of organised sectors rise during this period due to their huge marketing network and large advertisement spending, the unorganised sector too benefits by offering newer and exclusive products. Artisans, who mostly reside in rural areas, see significant rise in demand for their exclusive products, especially from the new generation buyers during festival times. The artisan industry is the second largest employer in developing nations after agriculture and employs women in large numbers. Their earnings go up during festival season changing their economic stature.
Festivals’ economic impact across the world is too big to ignore. According to a study by Atanu Biswas (The Durga puja challenges in the days of epidemic – Statesman June 26, 2020), professor of Indian Statistical Institute ‘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% of the city’s GDP and ‘Oktoberfest’ contributes slightly more than 1.35% of the Munichl’s economy.
Maybe, there are not many empirical studies in India which have estimated the economic impact of festivals on the economy, but the importance of these festivals on the economy is visible. A much-cited 2013 Assocham study estimated the size of the Durga puja industry at `25,000 crore. A 2022 study ‘Mapping the Creative Economy around Durga Puja 2019’ by British Council in collaboration with Queen Mary University of London supported by Indian Institute of Technology, Kharagpur estimated that a `32,377-crore ‘creative economy’ was generated during 2019 Durga puja in West Bengal. This accounted for 2.58% of the state GDP. The complete puja economy, however, may be much beyond that. Corporate funding and outdoor advertising account for about 90% of the funding of today’s pujas.
Traditionally, the retail sector turns out to be the biggest beneficiary of the festive mood, there is 100% increase in festive month sales value in West Bengal, primarily driven by increase in purchasing power and elevated spending sentiment. Most blue coloured job workers and state government employees receive Durga puja bonuses and plan purchases during this time. According to the report as much as 84.5% or Rs.27,364 crore of the puja economy was accounted for by the retail segment alone in 2019.
The livelihood generation based on just one festival in a year is noteworthy. Families across generations have been involved round the year in idol making, lighting and illumination, crafts and designs around Durga puja. The festival is the main source for earnings across the year for many families. Installation, art and decoration of pandals generated `860 crore while idle making generated Rs.260-280 crore according to this report.
In three years, between 2019 and 2022, Durga puja economy was estimated to have gone up by about 24% to `40,000 crore. In 2023 the Durga puja economy could well have touched the Rs.50,000-crore mark with puja organisers, advertisers, retailers and restaurants registering a 20% hike in businesses over 2022. Kolkata is expected to account for around 20% of the pie at Rs.10,000 crore.
According to reports of various puja committees, of the 3,000-odd community pujas in Kolkata, around 10 have an average budget of over Rs.50 lakh; 70 pujas spend Rs.25-50 lakh, 100 pujas spend about Rs.20 lakh each and the rest about Rs.5 lakh each.
India Inc gets involved in the community pujas as the grandeur of the festival provides an opportunity for advertising campaigns to further brand visibility, consumer engagement, cultural alignment, regional relevance, and sales and promotions. Targeting pandal-hoppers, companies such as Coca-Cola, Indian Oil, Dabur, Daikin and Adani Wilmarhave put up their hoardings, banners, flexes and kiosks around the bigpandals this year.
Online festive sales projected at over Rs 90,000 crore
In 2014, India witnessed the dawn of its inaugural eTailing festive season sales, and so this year’s sales mark the 10th anniversary of this festive season tradition. An improving consumer sentiment is expected for the 2023 festive season as the precursor to market boom. The e-commerce companies, which have become the main drivers of consumption growth in recent years, are likely to see more than 20% year on-year growth in gross merchandise value (GMV) in this festive season.
Online platforms clocked a GMV of `47,000 crore during week one of the 2023 festive season sale, which concluded on the 15th of October. This is a growth of 19% over week one of the 2022 festive season sale, according to Redseer strategy consultants on the 2023 Indian e-commerce festive season.
Redseer anticipates that the GMV for the entire festive month of India’s eTailing in 2023 will reach approximately ` 90,000 crores, marking an impressive 18-20% growth compared to the previous year’s festive month sales. This growth is expected to be fuelled by a significant user base of around 140 million shoppers who are projected to make online transactions during this festive month.
Redseer in its latest report has projected online sales to reach
Rs.90,000 crore in 2023 festive season. The growth is expected to be driven by the doubling of online shoppers during the festive season and introduction of newer products.
Auto sales, residential housing demand jump Car sales in India reached record highs in September, driven by strong consumer demand during the festive season coupled with the rollouts of new Sports Utility Vehicles. According to the Society of Indian Automobile Manufacturers (Siam) 3,61,717 vehicles were sold in September, 2023 – the highest ever monthly sales in the history of the domestic passenger vehicle (PV) market. During July -September 2023 as many as 10,74,189 cars were sold – also an all-time high – against 10,26,309 units sold in the same period a year ago.
The key reasons for the uptick in numbers (during September) are the onset of the festive season in the western and southern parts of India, and better availability of SUVs. Bookings and enquiries also remain healthy.
With a long festive season, the Federation of Automobile Dealers Association (FADA) also said it shifted its stance from 'cautiously optimistic' to 'optimistic'. Retail sales of vehicles rose 20.4% in September to 1,882,071 units, with passenger vehicle (PV) volumes increasing 19%,
The festive mood seems to have touched the house buyers a long before the festivals actually began. India’s residential real estate segment has recorded a whopping 36% growth during July-September quarter. Residential housing sales across India’s top seven cities including Bengaluru, Chennai, Delhi NCR, Hyderabad, Kolkata, Mumbai and Pune touched a record 1,20,280 units during July-September 2023 quarter against 88,230 units sold in the same quarter last year.
Riding high on larger sales volumes, these cities also witnessed significant new supply with over 1,16,220 units added in the quarter against 93,490 units in the corresponding period of 2022. In terms of budget segments, the mid-range segment (homes priced between `40–80 lakh) continued to dominate with a 28% share of the total new supply during this period suggesting the impact of festive mood on middle class homes.
Traditionally buying a home is as special in India as celebrating any festival. Buying property during Diwali is perhaps one of the best events every year. Many homebuyers consider this festival more auspicious and favourable.
Rising gold prices dampen festival demand for jewellery
Like buying a home in the festive season is considered auspicious, buying jewellery too is hailed as a part of religious ritual; for many across the country the buying of jewellery during dhanteras is a must. In fact, riding high on the consumer sentiments jewellers across the country are expecting gold to sparkle during this Diwali.
Indian jewellers are leaving nothing to chance during this festive season, recognising the critical importance of these traditionally high sales months for the industry. Indian Bullion and Jewellers Association, however, seems pessimistic and feels that the sharp rise in gold prices on the back of the raging war between Israel and Hamas is set to hit jewellery sales during the upcoming peak festival season of Dhanteras and Diwali Much before the onset of the festive season the World Gold Council (WGC) predicted last August that India's gold demand in 2023 could fall 10% from a year ago to their lowest in three years, as record high prices are dampening retail purchases. "We remain cautious about gold demand as it faces uncertainties due to elevated local prices and slowdown in discretionary spending," said regional chief executive officer of WGC's Indian operations.
Consumers might be buying less gold amid record-high prices, but top retail chains are seeing a surge in jewellery purchased through deferred or monthly payment schemes. Some of the big jewellery retailers saw over a 50% rise in purchases through monthly schemes.
According to an ET report leading jewellers such as Malabar Gold and Diamonds, PNG Jewellers and Senco Gold and Diamonds have witnessed a 30% rise in their sales during Durga puja days over the same time last year. Titan jewellery division has witnessed a19% sales from July to September, the report says.
The significance of festive time sales in India is enormous – more than a fourth of the yearly online sales are accounted for by the festive month alone. A large number of small retail traders across the country survive on festive sales accounting for about half of their annual sales.