Consumer spending is increasing in India during the Hindu festival season, despite major concerns about red-hot and rising inflation.
The festival season started began in September, with sales already exceeding pre-Covid spending.
Online and offline sales are projected to exceed $27 billion in November.
Offline festival sales have totaled nearly $15.2 billion already, compared to $8.5 billion in the pre-COVID period in 2019, according to the Confederation of All India Traders (CAIT).
Online sales have hit $11.8 billion.
Retail sales typically peak during the months of October and November, when the nation celebrates the Dussehra and Diwali festivals.
But this year’s spending is higher due to pent-up demand as the COVID-19 pandemic subsides.
CAIT group secretary general, Praveen Khandelwal, projected a 70 percent increase in sales compared to the pre-pandemic total as people spend more on clothing, jewelry, and home décor to celebrate festivals and the wedding season.
“Consumer confidence has improved with expanding economic activities, and the country would be celebrating festivals without any fear of pandemic after two years,” Khandelwal told Reuters.
India’s consumer spending is also being boosted by credit expansion, which hit a 10-year high of 16.2 percent in August as firms and consumers took out loans to fund investments and purchases, India’s central bank said.
Consumer expenditures increased despite the Reserve Bank of India (RBI) hiking its benchmark lending rate by 50 basis points to 5.9 percent in September to combat inflation, marking the fourth consecutive hike in the current financial year.
India’s annual retail inflation increased to 7.41 percent in September, spurred by a surge in food costs, and has been above the RBI’s target for three quarters.
RBI governor Shaktikanta Das said on September 30 that the rising inflation demands a “further calibrated withdrawal of monetary accommodation” to limit price hikes while supporting “medium-term growth prospects.”
“The necessity of such actions is driven by their domestic considerations, but in a highly integrated global financial system, they inevitably cause negative externalities through global spillovers,” Das was quoted as saying by The Hindu.
“All segments of the financial market including equity, bond, and currency markets are in turmoil across countries.
“There is nervousness in financial markets with potential consequences for the real economy and financial stability,” he added.
“The global economy is in the eye of a new storm.”
Das said that India’s economy remained resilient due to its macroeconomic stability.
RBI projected the country’s economy to grow by 7 percent in the 2023 fiscal year, less than the initial estimate of 7.2 percent.
“Our journey over the last two and half years, our steely resolve in dealing with the various challenges gives us the confidence to deal with the new storm that we are confronted with,” he added.
