Banswal confesses to being frugal this festive season because “everywhere you see the sentiment is down. Businesses are down. So, we only spend on what we need," says the 21-year-old who works as a sales professional at a bathroom fittings company.
Banswal’s behaviour also mirrors the concerns of Ishita Sharda, 36, a New Delhi-based marketing executive.
This Dhanteras, Sharda is likely to postpone her plans to buy a gold coin, because “prices are way too high". Instead, she plans to save the money so that she can travel to “beat the post-Diwali blues".
Sharda, however, says she might buy small gifts and new clothes for herself and her family, but only after surveying e-commerce websites because “even a 10% discount helps".
Sharda and Banswal reflect the sentiment of many Indian shoppers—once considered a big draw for India’s booming consumption-based economy—who are now turning cautious. The news is especially worrisome for India’s large and small retailers that draw anywhere between 30-40% of their business during the Diwali festive season that stretches over two months.
Shoppers such as Sharda and Banswal are in no mood to be generous. Instead, they are relying on zero-cost EMIs, postponing big-ticket purchases, or putting off buying new gadgets so that they can fund a holiday instead.
In the month of September, consumer confidence in India, as measured by the country’s central bank, dipped to a six-year low. Moreover, India’s economic activity has been cooling off for a few quarters now, reflecting a slump in domestic demand and manufacturing activity. Last week, the International Monetary Fund (IMF) slashed its growth forecast for India to 6.1% for the current fiscal, joining a growing list of brokerages and rating agencies that have cut India’s economic growth outlook.
This cautionary sentiment has been translating into sluggish sales of a wide variety of goods—from cars to biscuits— and it is unlikely to reverse in the thick on India’s ongoing festive season.
At Delhi’s Chandni Chowk area, which is a hub for large and small traders selling everything from clothes to spices, the mood is subdued.
Ajay Kumar Mittal, who runs a 50-year-old ready-made clothing store in the market says festivals were earlier a big hope for traders, but not anymore. “Shopkeepers used to decorate their shops, but that is missing this year. Public mein festive mood nahin hai, markets mein sajawat nahin hain (there is no festive mood, and there’s little decoration in the market). You can see crowds come in, but they are not buying anything," says Mittal.
He blames the liquidity squeeze that has turned households cautious. “Today, if they have money, they are not sure if they should put it in a bank," he says, referring to the scam unearthed at Punjab and Maharashtra Co-operative Bank Ltd that has led to restrictions on withdrawals for thousands of bank account holders. “And if they keep the money with themselves, they want to hold on to it for longer," he says.
At a large market in south Delhi, a sales executive at an electronics goods store echoes Mittal’s concerns.
“Business is down by as much as 10% compared to Diwali sales last year," says Rajeev Sharma, store manager at Sargam Electronics. People are only “buying what they need". Sharma, who was busy attending to a handful of shoppers in middle of the week, says that the shopper’s buying impulse is missing this time around.
One sales executive at Vijay Sales says financing options are the only way out in a climate where upfront cash purchases are tepid, with the share of overall sales coming via debit card EMIs rising briskly.
At jewellery stores too, the mood is sombre, especially in the run up to Dhanteras on Friday. A jump in gold prices over the past few months has dampened demand.
Analysts at brokerage firm Elara Securities said in a September report that “overall footfalls have fallen sharply in the past two-three months compared to six-seven months ago when gold prices were in the range of ₹31,000-32,000 per 10 gramme."
Demand aside, festive season sales in India over the last few years have also been disrupted by online shopping. Driven by steep discounts and attractive cash backs and EMIs offered by Amazon and Walmart-owned Flipkart, online shopping is giving stiff competition to the country’s traditional retail trade.
Online sales have continued to irk traders across the country this festive season too, the Confederation of All India Traders (CAIT) said in a note to the media on Monday.
“Traders have lost all hopes of doing good business in this festive season," representatives of CAIT said. “The main reason for such a disappointing scenario is due to surging sales in the e-commerce market, which is offering huge discounts on various products and even indulging in predatory pricing..."
Robin Das who runs a mobile phone store in Delhi says that over the last two years, stock at his store has dropped from 2,000 units to 500-600 units now. Our trade is almost dead thanks to better offers being given by e-commerce companies. “People just walk in to see the models but open e-commerce websites in front of us to order from there," Das adds.
Back in Chandni Chowk, Deepak Kumar Jain who owns a watch showroom says he hasn’t overstocked inventory this year, after seeing a slump in demand in the month of September. “We are only replenishing stock on a day to day basis if required," he says. Competition from e-retailers and a big drop in corporate orders has pushed Jain to slash his growth forecast for the festive season by 25-30%. After what Jain calls a “zabardast Diwali last year", the business is a little slow this year.