Festive Demand Set To Boost Indian Economy Even As Inflation Persists
Festive sales are even more crucial this year as consumers grapple with inflation and first quarter was affected by rains.

(Photo: Vivek Amare/ BQ Prime)
Economic activity continues to hold up and is expected to get a further fillip from the upcoming festive season.
From Raksha Bandhan on Aug. 30 until November, there will be expected infusion of about Rs 3 lakh crore by way of sale of goods, said Pravin Khandelwal, national secretary general of the Confederation of All India Traders. The trading community is gearing up to meet the demands during Raksha Bandhan, Ganesh Chaturthi, Navratri, Dussehra, and Diwali, he said.
Saif Khan, managing director and chief executive officer at BSH Home Appliances, anticipates a positive momentum in customer demand for premium home appliances. Unseasonal rains and floods have adversely affected the consumer sentiments in the first quarter of the fiscal year, said Khan, and the industry is now geared up to meet the expected growth in demand.
The August-December festive season in India is traditionally a period of consumption and investment, driving demand. Festive sales are a barometer of the economy's performance, even more this year as consumers grapple with inflation and first quarter demand was affected by unseasonal rains.
Discretionary spending has been under pressure since last Diwali, but there has been some recovery in July-August which is expected to continue and pick up pace amidst the festive season.Teresa John, Lead Economist, Nirmal Bang Institutional Equities
The season is off to a good start and sentiment remains positive thanks to the end-of-season sales earlier this month, according to Kumar Rajagopalan, chief executive officer at the Retailers Association of India.
Sales of smartphones, laptops, television sets, refrigerators, daily consumables and fast-moving consumer goods surged 25-30% on an annual basis during the Independence Day sales, said John.
The country's largest retailer, Reliance Retail Ltd., posted over 25% growth year-on-year in sales of electronic products at its Reliance Digital stores, boosted by smartphones and other high-ticket items such as television sets and refrigerators, said John.
Vijay Sales, which operates 127 stores, reported a 10-12% year-on-year jump in volumes, with the average billing value rising 5-7%, John said, quoting Vijay Sales Director Nilesh Gupta.
Automobile and consumer electronics manufacturers are stepping up production for the festive season by about 10-20% from last year's levels, with companies bullish about a strong recovery, John said.
So far, economic indicators have largely held up, although traffic indicators were sluggish, with most below their six-month average run-rate, according to John. Payment data, however, suggests robust demand, she said.
Resilient Domestic Activity
Domestic economic activity continues to hold up. Among indicators of demand, e-way bill volumes registered a sequential pick-up in July and rose 16% on an annual basis. Automobile sales, however, contracted 3.9% in July. Merchandise exports fell 15.9% year-on-year, while imports declined 17%. But manufacturing PMI held steady at 57.7, while services PMI rose at the fastest pace in thirteen years at 62.3.
Employment, too, appears to have seen an uptick. Quess Corp. reported a 23% increase over a year earlier in staffing requirements in anticipation of the festive period between April-August 2023.
Despite inflation and profitability pressures, segments such as manufacturing, BFSI, and retail have reflected remarkable growth, said Lohit Bhatia, president-workforce management at Quess Corp. "As many as 32,000 jobs were posted in this period, and we expect this trend to magnify each month by at least 5,000, as we inch closer to peak festivities, especially across industries impacted by direct consumers such as e-commerce, logistics and automobile."
Manufacturing: Hiring Sees A Spike?
According to Quess, the manufacturing and industrial segment reported a 245% year-on-year growth in requirement for professionals over April-August 2023. The automobile manufacturing sector is witnessing an uptick in recruitment, especially for EV production, to meet the demand expected due to Diwali festivities, it said. Apprentice manpower hiring continues to soar, it said.
The BFSI industry saw a 27% increase in manpower needs ahead of the festivities, followed by telecom at 14%, it said. Telecom has undergone massive digitisation with the launch of 5G, leading to considerable job creation, it said. Companies are focused on launching future-ready fibre solutions and products.
The idea of gig workers is also gaining traction within the retail industry, with a 9% rise in demand for staff, marking a shift from its previous dominance inside the e-commerce arena.
Hiring is expected to further improve as Diwali approaches, particularly in the e-commerce and auto sectors. The e-commerce and logistics industry is projected to have a sizable workforce of up to 3 lakh people across warehouse and delivery, making it one of the leading employers, Quess estimated.
Cautious Optimism
Still, the mood is of cautious optimism, Rajagopalan said. Retail inflation stood at 7.4% in July, compared with 4.9% in June, rising to the highest in 15 months. It is expected to stay high in August as food prices continue to spike, led by vegetables.
Those at the bottom of the pyramid have not seen a rise in their consumption amid high inflation, Rajagopalan said. Inflation is also seen weighing on demand for middle class consumers too, John said.