The Importance of Diwali in Modern India’s Economy

It’s that time of the year again when the high street outlets, the brightly-lit shopping malls, and even your local store across the street will put up display boards screaming “Sale”, “Diwali Dhamaka”, and “Diwali Bonanza”. Online stores will be brimming with schemes and offers, and your inboxes will be flooded with notifications of festive sales and extra special discounts.

It’s also the time of the year when these offers will be lapped up with a smile, as millions of Indian shoppers happily pull out their purses to make purchases. Be it a dip in the GDP, or a high inflation rate that strains home budgets, nothing seems to stop Indian consumers from splurging during the festive season of Diwali.

35-year-old Mukul Bhagat, the regional manager of a pharmaceutical company in Ahmedabad, has drafted his shopping list for the festive season. He has been saving up diligently for the past few months to buy a new iPhone this Diwali.

For Mitali Saraogi, a Kolkata resident, nothing screams ‘shopping’ more than the Diwali time. “While spending on clothes and gifts is a given, most of the big-budget shopping in our family happens around this time. After all, the discounts and offers you get during Diwali are hard to beat,” reasons the playschool owner.

Delhi duo, Nitin and Avani feel a little differently. “A few years ago, the Navratra-Diwali period sent everybody in a shopping frenzy. For everything people wanted to buy, they would wait till the festival season arrived, and it was this huge deal in the family to go shopping together. That has changed over the years,” says Nitin, the founder of a Delhi-based market research firm.

“Seasonal sale is overshadowing the Diwali shopping craze to some extent. Not only have we observed this change in consumer behaviour but it’s a personal experience too. Just this August I bought five-six pieces of clothing and twelve bedcovers, all in one go during the Independence Day sale,” agrees Avani, Nitin’s partner and the co-founder of the firm.

While that might be true to a degree, Diwali and the festive season still clocks in massive sales figures.

Big Boom Diwali for E-Commerce Companies

According to the latest study cited by Business Today, e-commerce brands like Amazon, Snapdeal, and Flipkart sold $3 billion (Rs 19,000 crore) worth of products during the six-day festive sale this year.

The study further predicts that e-commerce companies in India will generate GMV (Gross Merchandise Value) sales to the tune of nearly $6 billion (Rs. 39,000 crore) over the entire festive month until the end of this month. The sales of Flipkart and Amazon will increase by 30% in 2019, compared to the GMV of 2018’s festive season, according to the study.

In 2019, Walmart-owned Flipkart led the festive sales with a standalone GMV of 60% against its own record of 51% in 2018. Along with other group companies, such as Jabong and Myntra, the e-commerce company seized a total market share of 63%. Flipkart’s rival, Amazon, grabbed 30% of the market share during the festive sale, the survey said.

2019 Diwali Spending Trend

In August 2019, YouGov conducted a survey to sense the excitement of people about Diwali shopping and to evaluate consumer sentiments about ongoing promotional offers.

The survey estimated that this festive season, 31% of consumers will spend on gadgets and 42% on clothes. Surprisingly, men are much more likely to spend on both categories than women — 38% vs. 23% and 45% vs 38% — respectively.

While there has been a slowdown in the automotive industry, the forthcoming festive season gives a glimpse of hope to India’s automobile manufacturers. About 25% of people said they are looking at buying a two-wheeler and over 22% of people are thinking of buying a car within the next three months.

However, it’s not just the consumer shopping trends that define Diwali’s economic impact. There are more factors attached to it.

The Festival of Lights and its Money Matters

Diwali has, for a long time, been associated with prosperity and wealth creation. According to the Hindu calendar, it is a five-day celebration, which begins on the 13th day of the second half of the lunar month with Dhanteras — also known as Dhana-Trayodashi. ‘Dhana’ means wealth, and ‘Trayodashi’ means the 13th day.

Dhanteras is linked with several ancient myths, such as the legend of Yama and King Hima’s son, the tale of Dhanvantari, the physician of Gods, and the saga of Goddess Lakshmi. However, in the present age, Dhanteras is most popular for being an auspicious day that is believed to attract good fortune.

Each year, Indian households go overboard to buy metal items on Dhanteras, especially gold and silver ornaments, with the belief that the precious metals will bring Lakshmi, the Goddess of wealth and prosperity, to their homes. A year-long promise of prosperity is compelling, which makes people flock to jewellery stores on Dhanteras. On this day alone, the gold sales spike up to touch around 40 tonnes every year. Although this year, gold sales are expected to drop due to the rising price.

While Dhanteras used to be celebrated largely in the northern and western part of India, now the rest of the country seems to have joined the bandwagon. It’s increasingly common to see people making a beeline to buy gold and silver items during Dhanteras sales in cities like Kolkata, Chennai, and Bangalore.

Not just precious metals, Dhanteras is also considered an opportune time for big-ticket purchases such as property and cars. Consumer electronics is another area that witnesses heavy demand during this time. Last year’s festive season saw the sale of electronics and white goods taking a 12-15% leap from 2017.

Importance of Diwali within the Indian Business Community

The festival marks the Hindu New Year and for much of India’s business community, while many traders carry out a puja of their accounts book to celebrate the beginning of the traditional business new year. Offices are decked up and the worship of Lakshmi-Ganesh is carried out by placing a coin on the accounts book. It is a common belief that Goddess Lakshmi comes to dwell on the site of the puja, bringing with her favourable outcomes for the coming financial year. It’s also considered a particularly favourable time to start new projects, acquire new assets such as a home or car, and make new investments

The Well-Known Diwali Muhurat Trading

For ages, Dalal Street’s stockbroking community is practising the custom of Muhurat trading on the day of Diwali. To celebrate the fortunate start of the New Year, investors place token orders, which they hold for a long time, and sometimes never sell. Traders book intra-day profits, no matter how small the amount may be. At the end of the Muhurat trading hour, the Sensex normally closes on the plus side because of high trading volumes. Traders, this way, welcome the coming year on a positive note.

Diwali Kicks-Off the Wedding Shopping

Soon after Diwali, the season of weddings — a $54 billion market that’s growing by 20% per year — takes off with a boom. However, much of the wedding-related shopping also happens during Diwali and the festive season on the whole. According to market analysts, wedding shoppers during the festive season are driven by impulse. They say consumers are often lured by an active shopping mood that prevails in the country around this time of the year. Even if they are not planning to buy, they cannot resist the temptation of making a purchase because of the irresistible limited-period offers and mega discounts that are offered by brands during Diwali.

Besides being a reminder of our rich traditions, and bringing together family and friends, Diwali’s upbeat momentum plays a crucial role in revitalizing market sentiments. The Festival of Lights also provides Indian manufacturers, especially small and medium-sized enterprises, an incredible opportunity to contribute significantly in strengthening India’s economy, which will eventually boost the country’s ranking as a global manufacturer.

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