After a series of economic crackers, Indians are in no mood to splurge this Diwali

Not a blockbuster Diwali.
Not a blockbuster Diwali.
Image: Reuters/Anindito Mukherjee
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Indian shoppers are holding on tightly to their wallets this Diwali.

Sluggish economic growth, the demonetisation of high-value currency notes, and the implementation of the goods and services tax (GST) have snuffed out the cheer. So, at a time when consumers in Asia’s third-largest economy typically go into overdrive, buying gold, clothes, automobiles, and other items, they are going easy.

An online survey of 39,000 Indians on Oct. 14 found that 40% are likely to reduce their spending this Diwali, compared to a year ago.

“The sentiment is not that upbeat this Diwali,” said Amit Adarkar, CEO of market research firm Ipsos India, which conducted the poll along with news app InShorts. “Consumers are still reeling under the impact of demonetisation and GST,” he added. Only a little over 20% of those surveyed said they plan to spend more than last year, while 18% planned to spend the same. Up to 21% were undecided.

Diwali sales are a big deal for consumer-goods makers and retailers, who usually launch new products, bump up offers, and advertise heavily around this time every year. In some categories, such as electronics, retailers do up to 40% of their annual business around Diwali.

So far this year, retailers have reported a mixed bag.

For instance, jewellers across the country saw a dip in demand in September but recorded signs of recovery earlier this week, Reuters reported on Oct. 14. Indians typically buy gold coins and jewellery ahead of Diwali as it is considered an auspicious period for such purchases. Following a dull September, electronic goods retailers, too, have seen an uptick in last-minute sales. Smartphone sales, however, remained low.

“It’s very mixed. With consumer durables, demand peaked with the offers that were on before GST came in, with stores trying to clear stocks. I don’t see this season being as good as the previous festive season,” Ajay Srinivasan, director at Crisil Research, told The Hindu BusinessLine newspaper. “Consumer sentiment is a bit subdued compared to what you normally see.”