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 our 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.
Come October and India prepares itself for two of its biggest festivals; Durga puja and Diwali. Unlike the last two years when Durga puja was celebrated under the shadow of the coronavirus pandemic, the spirit of the festival is back this year with the prospect of pandal hopping and meeting friends and families to exchange greetings.
The significance of festivals, however, goes much beyond the social and cultural integration of a country as it has a huge impact on the economy. Festivals like Diwali are considered by the traders as auspicious moments to offer puja at their shop and open new accounts. The farmers can be seen to throng 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 festivals
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.
Traditionally, sale of 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 tourism sector also sees growth since holidaying to different destinations is common during Durga puja and Diwali.
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 Munich’s economy.
Back to India, despite limited studies, the importance of Durga puja for the economy of West Bengal is enormous. A much-cited 2013 Assocham study estimated the size of the Durga puja industry at ₹25,000 crore.
A recent study ‘Mapping the Creative Economy around Durga Puja 2019’ b0y British Council in collaboration with Queen Mary University of London supported by Indian Institute of Technology, Kharagpur and Smart indicated 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.
The biggest beneficiary is the retail segment, 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 idol making generated `260-280 crore according to this report.
Apparels, jewellery, and electronics experience the highest sales and retailers come up with various festive offers to attract the consumers. Demonetisation, digitisation, and online sales impacted the local retailers in 2019.
UNESCO has added Durga puja in Kolkata to its 2021 list of Intangible Cultural Heritage, giving international recognition to the biggest religious festival of West Bengal. The state hopes that UNSECO’s recognition would bolster the tourism economy. The West Bengal government has already started a carnival for the immersion process, modelling it after the Rio Carnival in Brazil. This has led to an increase in international tourism, thereby boosting the economy.
Online festive sales projected to grow 28%
Led by an improvement in consumer sentiments, the 2022 festive season is considered by many 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 a 28% on-year increase in sales to $11.8 billion during the festive month with a spurt in fashion category, according to a report, while bellwethers such as Amazon and Flipkart have already initiated steps to prepare for the upcoming season sale.
Strategy consulting firm Redseer in its latest report ‘Online Festive Sales - The Biggest GMV Churner of E-Tailing industry’ has projected online sales to reach $5.9 billion in the first festive week itself against $ 4.8 billion last year. The growth is expected to be driven by the doubling of online shoppers during the festive season as against 2018 said the report.
The fashion category is likely to see robust growth, driven by an increasing shopper base from Tier 2+ cities and first-time shoppers who generally tend to begin their online shopping journey with fashion. There will also be an increasing participation of fashion-led players in the festive sales this year, Redseer said. The mobile and electronics category is expected to remain strong during the period driven by better deals and new launches, it added.
The massive growth in festive sales will further push the overall online retail GMV (Gross Merchandise Value), which stood at $52 billion in 2021, to jump by 30% to reach $68 billion in 2022, Redseer said in the report.
The festive season would be critical for the ecommerce players like Flipkart and Amazon, both of which had an intense fight last year with last-minute changes to festive dates to outsmart each other.
Confirming the Redseer’s observations, the RBI in its latest state of the economy report has said that the onset of the festival season should boost consumer demand, including rural, as sowing activity picks up. This is also reflected in improved consumer confidence. Consumer confidence is recovering after a prolonged period of subdued growth since the onset of the Covid-19 pandemic. Both the Reserve Bank of India’s consumer confidence index and that of the Centre for Monitoring Indian Economy’s (CMIE’s) consumer sentiment index showed a marked improvement in July. Improved perception about employment, household income and spending led to an improvement in consumer confidence.
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.
The number of online shoppers during the festive week is projected to grow four times in four years from 20 million in 2018 to 80 million in 2022. However, the participation of online shoppers during the festive week compared to overall annual online shoppers is expected to double from 18% in 2018 to 38% in 2022. This is driven by multiple factors such as increasing awareness of the festive sales among shoppers, growing reach and targeted selection for shoppers across city type and growing expansion of the affordability constructs. In addition, the rise of new e-commerce models such as video commerce will further drive the growth of online shoppers during the festive period.
Jewellers hope gold to sparkle this Diwali
Jewellers across the country are expecting gold to sparkle during this Diwali following a drop in price and pent-up demand. Jewellery sales this July were 36% higher than they were last July, according to the Retailer Association of India. After witnessing a spike in July, jewellery brands are looking forward to bumper festive sales this year. And if this early sale is any indication, gold indeed, would sparkle this Diwali. Jewellery manufacturers are opening new stores and upping their marketing activities to reach out to more consumers.
Vibrancy had returned to the Indian jewellery market last year almost two years after the coronavirus pandemic threw several curveballs at the economy. Jewellers saw sales worth Rs.7,500 crore and around 15 tonnes of gold jewellery were sold on the Dhanteras festival. This includes an estimated sale of `1,500 crore in Maharashtra, `1,000 crore in Delhi, Rs.600 crore in Uttar Pradesh and `2,000 crore in South India, besides other states of the country, as per the joint statement released by the Confederation of All India Traders (CAIT) and its jewellery arm, All India Jewellers’ and GoldSmith Federation (AIJGF).
Impact of inflation on festive sales
Even as market analysts are projecting a huge 28% increase in festive season online retail sales in 2022, the high inflation, both globally and at home, and falling value of rupee against dollar are causing concern. With the inflation rate hovering at 7%, FMCG firms are sceptical about giving out huge discounts to consumers this festive season. Surging inflation is forcing many Indians to rein in spending, threatening a slowdown in FMCG and consumer durable sales.
The sharp rise in global inflation is feared to hit festive season demand for smartphones. Market trackers are already cutting annual shipment estimates for smartphones, fearing a weaker-than-usual festive season sale, which accounts for a third of annual sales.
This is largely because high global inflation is impacting the cost of production of smartphones. Despite a strong manufacturing base in India, most of the components are sourced from other countries. Counterpoint Research, a global industry analysis firm headquartered in Hong Kong is now estimating its annual forecast to be 175-177 million units from its initial 181 million estimates. International Data Corporation, India is also considering a downward revision from its initial 5% annual growth estimates of smartphone sales.
Automobiles and real estate hope more business
But if the improvement in consumer sentiment as well as improvement in macro fundamentals has boosted the prospect of higher merchandise sales in 2022, the automobile sales too are expected to see a significant rise in the festive season. Following improved demand, new launches and improved production, the passenger vehicle sales this festive season could touch their highest levels in a decade, the Federation of Automobile Dealers Associations of India said, adding that two-wheeler sales could also finally see an uptick this year.
According to Society of Indian Automobile Manufacturers, total domestic sales of cars increased 17.7% from a year earlier in August at 187,000 as improving availability of semiconductor chips aided a ramp-up in production. During the April-July period of the current year the passenger vehicle industry has witnessed a growth of 33% over the same period last year.
India’s residential real estate segment has recorded a 9-year high in terms of sales volume during the first half of 2022 (January-June), said London-headquartered global property consultancy firm Knight Frank.
The residential space saw an annual growth of 60% during the period to 158,705 housing units across top eight cities in the country, as compared to 99,416 in the first half of 2021. For the commercial office segment, the Indian market grew substantially and delivered a strong performance as it recorded transactions to the tune of 25.3 million square feet, up by 107%. It indicated the potential of the market on the back of a waning pandemic and promise of a sustained economic recovery.
For Indians, buying a home is as special 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.