Rs 12-14 lakh crore! Pent-up demand, I-T relief, low inflation to trigger big bang festive spending

The Indian economy is expected to witness a major revival this festival, with festival spending booming up to Rs 12-14 lakh crore, stated a report. This revival is due to a combination of factors, including the materialisation of pent-up demand, prices coming down, downward inflation, and income tax relief.

According to a report by Bank of Baroda, major consumer durable companies have signaled higher frontloading of demand. Google Trends data has also indicated that demand for items such as air conditioners (AC), LED/LCD TV and automobiles have reached new highs, coinciding with the announcement of GST rate cuts. 

The BoB report analysed spending trends from the past 5-6 years for the October-December period, which includes major festivals like Dussehra, Diwali, Christmas and more.

“The analysis shows that total consumption spending related to festivals (including marriages) would be in the range of Rs 12 lakh crore to Rs 14 lakh crore. The various segments which will account for the bulk of this spending include clothing, marriages, electronics and auto. Daily consumption goods like food items and other FMCG products have also been kept outside the ambit of this exercise,” the report added.

FESTIVE SPENDING

Spending on clothing and footwear is anticipated to reach new heights, accompanied by robust sales in electronics, white goods, and automobiles, the report added. The surge is further fuelled by traditional factors such as family gatherings, events, and auspicious occasions like marriages. These projections provide insight into evolving consumption patterns influenced by shifting GST rates, e-commerce growth, and the celebratory spirit, with each segment poised to experience distinct increases in demand.

Clothing and footwear remain a critical area of expenditure, as Indian consumers often purchase new attire for festive celebrations. Estimates suggest "a possible expenditure of Rs 2,80,000 to Rs 3,00,000 crore on clothing and footwear in the festive period." Growth in online channels and changing consumer behaviours contribute to this significant rise.

The automobile sector is poised for record sales this festive season, following GST 2.0 reforms. Lowered tax rates and the removal of compensation cess are expected to boost demand for both passenger and two-wheeler vehicles. "This will result in an estimated sale of Rs 1,50,000 to Rs 2,00,000 crore," the report added. Automakers have already adjusted prices to reflect the new tax regime.

Electronics, particularly smartphones and laptops, remain a focus for festive buyers. E-commerce sales and price reductions on flagship models are anticipated to incentivise consumers. As projected, the report stated it expects an estimated sale of Rs 1,00,000-Rs 1,20,000 crore.

White goods, including televisions, washing machines, refrigerators, and air conditioners, typically see heightened demand during festivals due to traditions and promotional offers. Based on production trends and a conservative growth estimate, "the sales of white goods would be in the range of Rs 35,000-40,000 crore," it said.

Sweets, integral to festive and wedding celebrations, form a large part of seasonal spending. It is reported that this year sweets could see sales of around Rs 40,000-45,000 crore. Most of the market remains unorganised.

Corporate gifting and events, including celebrations like Navratri, Christmas, and New Year, are expected to see expenditure between Rs 15,000 and Rs 20,000 crore. This includes gifts for employees, clients, and event-related expenses.

Travel activity through airlines and railways also accelerates during the festive months, as individuals visit family or take vacations. The sector is projected to account for around 5 per cent of total festive spending, with "travel accounting for ~5 per cent of the total spending, amounting to range between Rs 60,000-70,000 crore”. Most of this expenditure is attributed to air travel due to higher fares and passenger volumes.

Online meal orders and restaurant visits surge as households gather to celebrate. Quick commerce platforms also report increased order volumes in the lead-up to and during festivals. "This in turn, will result in an estimated sale of Rs 65,000-75,000 crore across platforms," it said.