Here's why India may see high consumer spending this festive season

Indians seem to be gearing up for an exuberant festive season with a number of high-frequency indicators pointing towards robust growth in consumer expenditure this year.

For instance, car sales touched a historic high in September amid festive-season bookings and new car launches. Further, GST mop-up has also remained robust at over Rs 1.62 lakh crore in the month. Significantly, states such as Maharashtra, Karnataka, Tamil Nadu, and Andhra Pradesh registered 17-21 per cent year-on-year (YoY) growth in GST revenues in September 2023. “GST collections of Rs 1.6 lakh crore in the first month of the four-month-long festive season augurs well for the coming months, and is in line with other high frequency indicators, reflecting a positive uptick in the economy,” says M.S. Mani, Partner at Deloitte India.

Another key indicator of economic activity—the performance of eight core infrastructure industries—grew 12.1 per cent YoY in August, a 14-month high. With five of the core sector industries—coal, natural gas, steel, cement and electricity—registering double-digit YoY growth, that, too, augurs well for industrial production. These eight sectors have a combined weightage of 40.3 per cent in the Index of Industrial Production. Separately, Manufacturing PMI moderated in September to 57.5 from 58.6 in August, but business optimism remains high. Also, Services PMI recorded one of the strongest growth rates in 13 years in September with a reading of 61.

Typically, the festive season starts with Ganesh Chaturthi and continues till Diwali, and ends with the New Year. While sales have been strong in the past few years despite Covid-19, concerns about muted consumption demand have been flying thick this fiscal.

With many export markets down in the doldrums, strong domestic demand would help sustain growth. Counting on that, online retailers are also gearing up for strong sales. “Every household spends during the festive season. In Q3FY24, demand as measured by private final consumption expenditure is likely to be higher due to a weak base last year and some cooling off in inflation,” notes Devendra Kumar Pant, Chief Economist and Head of Public Finance at India Ratings & Research, adding that how demand pans out beyond the festive season would depend on the trajectory of inflation. However, there’s definitely a festive cheer in the air for businesses this season!

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