News
Inflation could dampen consumers’ spending spirits this Diwali, survey shows
Summary
- A survey by YouGov shows 31% of urban Indians plan to spend more during this year's festive season than they did last year, down from 36% in 2022
As high inflation eats into people's purchasing power, fewer urban Indians are planning to increase their spending during the upcoming Diwali season compared to last year. About three in 10 urban Indians (31%) said they were likely to spend more than last year during the festival of lights in 2023, down from 36% in 2022, according to a survey by YouGov India. Moreover, two-thirds of urban Indians (67%) said their household expenses had gone up from a year ago. The survey was conducted online in July 2023 and had over 2,000 respondents.
But this may not be enough to stoke the anxiety of companies that bank on the Diwali festive season to shore up sales of consumer goods. That's because people who plan to increase their spending from last Diwali were still the largest group, followed by 29% who plan to spend the same, and 26% who plan to cut spending. Also, over half (52%) of respondents said they were looking forward to splurging during the Diwali season.
Consumers loosen their purse strings during the festival season for everything from cars and appliances to jewellery, clothes and gifts. However, inflation seems to have dampened sentiment this year. Although urban Indians appear to be in a better financial position, rising living expenses may dent their spending, the survey indicates.
Consider this: most respondents (68%) said their gross household income—total earnings before taxes or other deductions—and savings (55%) were higher today than a year ago. Yet expenses have broadly risen from a year ago. Significantly, 53% respondents said their expenses had shot up in the past three months—the period coinciding with the start of the festive season.
Worryingly, an equal share of respondents said they have been finding it difficult to meet monthly household expenses. A rise in the cost of living due to inflation was cited as the biggest reason for the squeeze by 39% of respondents, followed by an increase in the cost of living due to other reasons (30%) and a rise in medical expenses (16%).
Only a little more than a fifth (21%) said their expenses had remained the same over the past three months.
Consumers are also doing everything they can to cut expenses. This includes postponing or cancelling big spends in the next few months (32%), curtailing essential and non-essential spending (31%), and borrowing money to meet expenses (14%).
All through last year, retail inflation in India was above the Reserve Bank of India’s 6% upper limit. Consumer price index (CPI)-based inflation eased to 6.83% in August from a 15-month high of 7.44% the previous month, according to government data. Inflation in food prices – including essentials such as eggs, meat, spices and sugar – remains a concern, however.
