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  • Writer's pictureThe Financial Literacy Cell


Festivals take the money out of your pocket.

Festivals in India have a deep-rooted connection with country’s economy. As a festival hits the calendar, there’s always a thrill around, a sparkle in the eyes of consumers. This thrill directly changes the shape of Indian Economy’s Demand-Supply & Utility Curves. Economists have found festivals to be a permanent source of income generation for the country.

But, the unexpected and unwelcoming wave of coronavirus has negatively impacted almost all the sectors of the Indian economy, inducing anxiety and dampening consumer sentiments. Private consumption, which is one of the strongest propellers of India’s GDP, declined by 26.7% year-on-year in Quarter 1 FY 2020-21. India became one of the world’s worst- performing major economies on the back of one of the strictest lockdowns imposed in the country. Retail loans are not picking up despite rate cuts, having contracted by 0.9% during the end of March and July. Millions of people lost their jobs impacting incomes and livelihoods. Production of non-essential items were impacted for almost 2.5 months.

However, there are two sides of a coin and focusing on the positive side is unequivocally the need of the hour. On one hand, the coronavirus has created a sense of trepidation in the minds of the people and on the other hand it can force the government to review the status quo, companies to be indigenous and consumers to chase value. It can be an exercise towards renewal.

With the festive season approaching, there is a hope for revival of the sluggish economy. Festivals induce people to invest their money in various consumer durables and hence can give a big boost to the consumption sector. Diwali, the festival of lights, creates a sense of enthusiasm among people. People wait for “Dhanteras” to buy homes, cars and jewelleries. Companies, are trying to focus on this silver lining amidst the dry slowdown pandemic period. Various sectors affected by a slowdown have now deployed their own tools to push sales. Discounts and deals as well as special loan offers are on the cards. Some people are already bullish. Let us dive further into this optimism!

Ambuj Chandna, senior executive VP and head of consumer and small business loans at Kotak Mahindra Bank (NSE 1.51%), feels that the usual 15% bump in the festive season will be there this year too. The players at the forefront of the festive consumption challenge are keeping a brave face, increasing retailer margins to enable higher discounts to consumers, designing easier financing schemes, spending more on marketing and even speaking about green shoots. Similarly, Jewellery and watch retailer Titan, too, seems to have struggled but now sees light at the end of the tunnel. Sandeep Kulhalli, senior vice president for retail and marketing at Titan’s jewellery division, admits there have been negative sentiments around the rising gold prices and the consumption-led slowdown. “We feel that gold prices have stabilised at a new normal and the festival season, as well as the wedding season, will see a 25-30% increase in sales over current price levels. Godrej Appliances business head Kamal Nandi said financing schemes this year will be for longer duration, and low or no-cost EMIs. At present, finance schemes account for around 60-65% of white goods purchases in the cities, while it’s around 25-30% in smaller towns. We are seeing most of the purchases during onam in kerela are on finance”, says Nandi.

Recently, the government has also come up with a scheme to ease the liquidation process. Finance Minister Nirmala Sitharaman did a course correction, announcing a raft of measures to boost the economy. She announced a payment of cash in lieu of LTC and Rs 10,000 festival advance to government employees to stimulate consumer demand during the festival season and boost the economy. She also announced additional capital spending and Rs 12,000 crore, 50-year interest-free loan to states to boost the economy that has been battered by the pandemic and the resulting lockdown. The Reserve Bank of India (RBI), on its part, has now asked banks to link loans to retail customers and small companies to external interest rate benchmark, a measure that is expected to bring down home, car and personal loans, thereby benefitting consumers.

Not only the government and private concerns but also various E-commerce giants, namely, Flipkart and Amazon are in the race to make the best use of this golden opportunity in front of them disguised as festivals to increase their profits. Flipkart’s big billion days claims to create 70,000 direct and lakhs of indirect jobs during the festive season. It also revealed that 70 sellers on it’s platform turned crorepati and around 10,000 of those became lakhpati through early access in the first three days of The Big Billion Sales. Similarly, The “Great Indian Festival Sale” of amazon is all set to drive money out of people’s pockets by tying up with various banks like Citibank, ICICI, and Kotak Mahindra to give instant 10% discount at the time of sale.

Thus, the festive season is expected to brighten India’s GDP by increasing private consumption. The markets which have remained dull for a long period of time during the pandemic, are expected to again witness a rush of people. The long- lost sparkle of the Indian economy can again take an upturn in this festive season. In the words of IMF Chief Kristalina Georgieva, "India is about to have a festival season. This is a good time to give a boost to the economy. India is a leader in IT, people can shop from home!”

Thus to conclude, though India has technically entered recession, festivals can give the much needed boost to the Indian economy!

By Priyanshi Sharma

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