NEW DELHI – India’s festive season spending is booming as consumers splurge on cars, smartphones and televisions, buoying growth in one of the world’s fastest-expanding economies.  

Sales at online platforms like Amazon.com and Walmart-owned Flipkart were up by almost a fifth in the first week of the festive sales from a year ago.

Digital transactions recorded by Unified Payments Interface surged about 40 per cent in October from a year earlier.

India’s festive season usually runs for several weeks until the Hindu religious holiday of Diwali – which takes place on Nov 12 in 2023 – with millions of Indians often bingeing on food, gifts and home improvements.

The sales are a key indicator of the health of consumption, which makes up about 60 per cent of India’s gross domestic product.

Economists point to an easing in inflation and a pickup in wages, especially in the rural countryside, where a majority of India’s population live.

Consumer confidence reached a four-year high in September, the latest central bank figures show, while demand for bank loans is hovering near a 12-year high despite interest rate hikes in 2023.  

Prime Minister Narendra Modi’s government is also targeting farmers ahead of elections, giving them higher guaranteed prices on some crops and curbing cooking gas costs.

“Both urban and rural consumption are entering the festive season on a much stronger footing,” Ms Yuvika Singhal and Mr Vivek Kumar, economists at Quanteco Research, wrote in a report last week.

The continuing fiscal support directed towards rural areas ahead of polls could further boost consumption in the sector, they said. 

Stronger spending is helping to drive manufacturing activity in Asia’s third-largest economy and underpinning growth of more than 6 per cent in the current fiscal year that ends in March 2024.

The International Monetary Fund predicts India’s economy will grow 6.3 per cent in both 2023 and 2024 – the fastest pace among major economies. 

Consumer businesses are reporting stronger sales, while banks like Axis Bank are betting on a pickup in business momentum in the next few months.

Reliance Retail said in a statement last week that it saw “strong shopping” during recent festivals.

On top of the festive period, consumption will likely also get a boost from the Cricket World Cup and the upcoming wedding season. 

The cricket tournament is being hosted in cities across India until Nov 19, with some economists estimating it could add US$2.6 billion (S$3.56 billion) to the economy as fans spend on travel and eating out.

The Confederation of All India Traders, the country’s largest traders group, expects the wedding season, which runs from Nov 23 to Dec 15, will result in US$50 billion of spending on items like gold jewellery, clothing and other consumer goods. 

“The festive season is expected to be followed by a robust wedding period, both of which combined should support near-term growth,” Ms Teresa John, an economist at Nirmal Bang Institutional Equities, said last week.

“Easy availability of credit and expectations of cooling inflation should also aid a gradual recovery in discretionary spending, particularly in the mass market.”

Online sales from Amazon, Flipkart and others reached 47 billion rupees (S$773 million) in the week through Oct 15, consulting firm RedSeer said in a report.

Mobile phones, electronic goods and large appliances drove around 67 per cent of the sales, it said.  

UPI, which records real-time digital payments, processed transactions worth 16.46 trillion rupees from Oct 1 to Monday, an increase of more than 40 per cent from a year earlier.

Credit card payments jumped 16 per cent to 1.42 trillion rupees in September, data from the Reserve Bank of India shows.

Factory floors are also buzzing, with manufacturers adding more capacity to keep up with the strong demand.

“We have healthy orders across most of the verticals led by mobile phones, LED televisions and washing machines,” Mr Saurabh Gupta, chief financial officer at Dixon Technologies, one of the country’s largest contract manufacturers, said in October.

Dixon had introduced multiple shifts across the majority of its 20 factories to meet its order pipeline. BLOOMBERG