Festive Season Forecasts a Bright Spark for India's Economic Revival

by Sonam Srivastava

Published On Nov. 4, 2023

In this article

India, often referred to as the land of festivals, has a tapestry of diverse cultures, religions, and traditions. The festive season in this country is not just a mere celebration of religious or cultural events; it's an embodiment of the nation's diverse ethos and its millennia-old traditions.The festive season in India is a perfect amalgamation of cultural celebration and economic activity. While it serves as a reminder of the country's rich cultural tapestry, it also acts as a significant driver of its economic engine.

  • Boost to Consumer Spending: The festive season sees a significant surge in consumer spending. From buying new clothes and jewelry to home appliances and vehicles, there's a marked increase in consumption, propelling the retail and manufacturing sectors.

  • Employment Opportunities: The demand for goods and services during the festive season results in temporary employment opportunities, particularly in sectors like retail, e-commerce, and logistics.

  • Stimulus to Key Industries: Industries such as textiles, electronics, and handicrafts witness a peak in their sales. The jewelry industry, especially gold, sees a massive uptick during festivals like Diwali and Dhanteras.

  • E-commerce and Retail Sales: With the advent of digital India, e-commerce platforms like Amazon, Flipkart, and local players roll out massive sales campaigns, driving digital consumerism to new heights.

  • Real Estate and Auto: These two sectors, in particular, benefit from festive offers and discounts, leading to an increase in sales of properties and vehicles.

Impact of Festivals on India’s GDP

Festivals’ economic impact across the world is too big to ignore. According to a study by Atanu Biswas, professor of Indian Statistical Institute ‘Hanami’ contributes about 2.25% to the economy of Japan, the ‘Mardi Gras’ festival in New Orleans in the US contributes slightly more than 1.5% of the city’s GDP and ‘Oktoberfest’ contributes slightly more than 1.35% of the Munich’s economy. Durga Puja accounted for 2.58% of the West Bengal GDP in 2019. More recently, large events such as the Taylor Swift & Beyoncé concerts in the US and the Barbie + Oppenheimer movies are predicted to add $8.5 billion to the U.S. GDP accounting for 0.7% and 0.5% each.

Festivals play a pivotal role in stimulating economic activities, reflecting deeply in India's GDP growth. The festive season, particularly Durga Puja and Diwali, traditionally spurs heightened consumption and investment. During this period, a range of sectors from apparel to electronics, witnessed a surge in sales. Artisans, majorly in rural sectors, see a substantial rise in demand for their unique products.

For instance, a 2019 study highlighted that Durga Puja generated a 'creative economy' worth ₹32,377-crore in West Bengal alone, accounting for 2.58% of the state's GDP. Additionally, the influx of international tourists, especially after global recognitions like UNESCO's inclusion of Durga Puja as an Intangible Cultural Heritage, bolsters the tourism economy. The digital realm is not far behind; e-commerce giants anticipate a 28% growth in sales during the festive month. All these factors cumulatively amplify the country's GDP during the festival season.

Let’s Understand the Consumption Trends in India

Consumer Sentiment Has Seen a Recovery in September

One way to gauge consumer sentiment is through CMIE’s Consumer Sentiment Index which captures consumers’ inclination to spend and purchase durable goods like cars, TVs, home appliances etc. It shows strong recovery over the last 6 months - increasing 2.6% per month from January to July 2023. It has fallen in August by about 1.5% due to several issues like inflation and crude oil prices but has recovered once again in September. Looking at the historical consumer sentiment, the upcoming festive season is likely to boost consumer sentiment and spur private spending.

Consumption Trend Picking Up

1. Domestic Demand Drives Growth: India's economic surge stands out in Asia due to robust domestic consumption, especially evident during the festive season. Reports indicate a significant increase in consumer spending on various products, from cars to cosmetics. E-commerce firms predict a 30% growth in orders during the festive period.

2. Consumption and Investment Boom: While some argue that no economy can solely thrive on consumption-led growth, the Indian scenario suggests that growing consumption will catalyze capital expenditure by companies. As demand grows, firms are likely to invest more, adding another growth engine to the economy.

3. Shift to Premium Products: The Indian consumer is evolving, with a noticeable trend towards "premiumisation". Higher-priced segments in various industries are witnessing increased sales, indicating the rise of the Indian middle class. There's a debate about whether this trend is due to the rich spending more, but it's also crucial to consider the expanding middle class, which is projected to constitute 61% of the population by 2047.

In addition, factors like infrastructure development, e-commerce growth, and increasing consumer credit are contributing to the consumption trend. However, for sustainable growth, India must address concerns like stagnant rural wages and focus on creating more formal jobs while ensuring welfare for the masses.

How Does Festive Season Improve Consumer Sentiment?

India's festive season, from Ganesh Chaturthi to Diwali and beyond, is more than just a cultural extravaganza; it's a major economic catalyst. Sales reports from companies during Onam in 2023 showed premium and high to mid range sales with companies reporting strong net sales growth of 20% on a year on year basis. Analysts expect the coming festive season could offset some of these issues and improve consumer sentiment amid higher spending opportunities. Here's how:

  1. Auspicious Buying: Traditionally, festivals like Diwali and Dhanteras are viewed as auspicious times to make significant purchases, such as gold or property. This isn't just cultural; it's a deeply rooted economic behavior leading to sales surges.

  2. Marketing and Discounts: Retailers, both offline and online, capitalize on this sentiment by offering massive discounts and attractive financing options. The combination of festive euphoria and tempting deals sparks consumer spending.

  3. Deferred Purchases: Many Indians postpone major buys, awaiting festive deals. This leads to a pronounced spending spike during festival months.

  4. Economic Ripple Effect: This surge isn't limited to consumer goods. The auto, electronics, and FMCG sectors, among others, experience a notable uptick. A robust festive season often sets a positive tone for the economy for the ensuing months.

  5. Political Context: This festive season precedes the election season in 2024 for which government spending will expectedly increase. Political campaigns and related activities often boost local economies.

  6. Corporate Performance: Business remained strong until August. An analysis of 1,505 listed companies by the Hindu showed impressive year-on-year profit growth in Q1 FY24. They achieved a 50.3% increase, up from 25.4% in the previous quarter, with the banking sector contributing 62% growth. Companies outside the banking sector also saw robust profit growth at 44.8%.

Retailers expect 10 to 12% Increase in Growth - Consumer Sentiment to Peak in Festive Season

In essence, India's festive periods are significant economic events with key festivals contributing upto 40% for annual sales of some companies in sectors like home decor, apparel, electronics, confectionary goods etc. The blend of traditional sentiment and modern commerce propels substantial parts of the Indian economy, making these festivals key indicators of the nation's economic health as seen in the consumer spending graph where we can see upward improvement in Q3 around Sep-Dec from 2013 and even during the Covid pandemic.

There is an expectation of discretionary spending in consumer, automotive, banking, real-estate, e-commerce and many more sectors picking up in the coming months. Retailers are expecting at least 10-12% growth over last year's sales and are expecting consumer sentiment to pick up and hit its peak by festive season. We have already seen significant recovery in consumer sentiment and spending power during festivals in August such as Onam, Independence Day weekend, Raksha Bandhan. Demand for FMCG products has grown in this period, and many companies are looking to boost advertising and marketing spends to increase demand further.

In anticipation of this, companies are expected to hire a significant number of temporary workers this year. Let’s look at the employment trend during festive seasons and what to expect from the current season.

Employment Activity Picks up With Upcoming Festive Season

The festive season in India is a significant economic catalyst - last year the Naukri JobSpeak Index touched 3,103 with a 13% YoY growth substantiating the link between festival-driven consumption and employment. The phenomenon is not restricted to the major cities alone; metros like Mumbai registered a 27% YoY growth in hiring last year, while emerging cities like Coimbatore and Ahmedabad also showed positive employment trends. Surveys across industries show that there is an estimated 20% increase in employment during the festive season.

This surge in temporary hiring allows companies to flexibly scale their operations and ensure that they are adequately staffed to meet the spike in demand during the festive months. From the insurance sector, which has shown exceptional performance, to travel and hospitality, retail, and FMCG, the data suggests that almost every industry is taking strategic steps to maximize the revenue opportunities presented by the season. While the festive quarter is often seen as a short-term boost, its effects can have long-term implications, creating a chain of success that benefits both the market and workforce for months to come. It's a cyclical process where increased consumer spending results in higher business revenues, which in turn necessitates more hiring to manage the uptick in operations, thereby fueling further economic activity.

Hiring for the coming Festive Season

Demand in rural areas and smaller towns is expected to contribute to this hiring trend, thanks to positive domestic economic indicators, including lower retail inflation, consistent growth in manufacturing PMI, and reduced expectations of an interest rate hike. These factors are boosting the employment outlook.

  1. Manufacturing & Industrial: The 245% YoY growth in hiring for the manufacturing and industrial segments, suggests that businesses are preparing for a surge in demand. This is particularly significant with Diwali festivities approaching.

  2. Automobile Manufacturing: There is

  3. BFSI & Telecom: Both sectors also saw increased hiring, possibly in anticipation of the festive season and due to the massive digitization triggered by 5G. Such trends can have a spillover effect on related sectors and boost economic activity.

  4. Gig Economy: A notable 9% increase in demand for retail staff indicates a broadening in the types of roles suited for gig workers, extending beyond just e-commerce.

  5. E-commerce and Logistics: With the workforce in this sector estimated to reach up to 3 lakh people across warehouse and delivery, it's an indicator of a boom in online shopping and logistics, especially as the festive season nears.

  6. Discretionary Consumption: Like Retail, Beauty, Fashion & Lifestyle are also stepping up their hiring of temporary works to meet seasonal demand spike in the upcoming festive season.

Sectors for Festive Season in 2023 - Top Investment Picks

Automotive Sector

Ahead of the festive season, domestic passenger vehicles have just posted the highest ever monthly sales, with August sales being 10.4% higher on a year-on-year basis due to better chip supply, high demand for SUVs from companies like Maruti Suzuki, Mahindra & Mahindra, strong growth in the overall economy and leading up to the upcoming festive season. offsetting weaker sales in entry-level cars. Commercial vehicle (CV) sales remain resilient, particularly in medium and heavy commercial vehicles, with contributions from M&M, Ashok Leyland, and Tata Motors. Companies are ramping up inventory in anticipation of festive demand. Three-wheeler sales, especially from Bajaj, have surged remarkably. Overall, the industry is optimistic about the festive season, particularly for SUVs and commercial vehicles. With new launches and discount offers, expect to see a surge.

Automobile manufacturers are stepping up production for the festive season by 10% to 20% from last year’s levels.


Sales of consumer electronics and fast-moving consumer goods saw a substantial surge of 25-30% year-on-year during 2023 Independence Day sales. Reliance Retail Ltd., the country's largest retailer, posted over a 25% growth in the sale of electronic products, particularly smartphones, television sets, and refrigerators. Vijay Sales, which operates 127 stores across India, also reported a 10-12% YoY growth in sales volumes, with the average billing value rising by 5-7%. Demand for fast-moving consumer goods, especially sweets, electronics and luxury items, soar around festival season as we can see in the NIFTY FMCG rising from 2019 onwards.


Online retailers in India are gearing up for a strong festive season, sales are expected to increase by 20% to over Rs 90,000 crore, according to Redseer. Celebrating the 10th anniversary of its festive season sales, the Indian e-commerce market has grown almost 20-fold since 2014, now expected to reach a gross merchandise value of approximately Rs 5,25,000 crores in 2023. The number of annual transacting users has also soared 15 times, reaching 230 million this year, with a minimum of 140 million shoppers expected to make transactions this festive season.

The sector is also benefiting from larger purchase sizes and higher advertising spends from brands. Premium products are expected to drive up average selling prices, making this festive season potentially the most efficient in terms of margins. While metros have seen faster growth compared to Tier 1 and Tier 2 cities in recent quarters, strong growth is expected across all city tiers this season. Technological innovations, such as generative AI, are also set to enhance consumer experiences and contribute to stronger growth momentum.


Manufacturing sector is showing signs of robust growth, according to the latest S&P Global Purchasing Managers' Index (PMI). The PMI for August climbed to a three-month high of 58.6, marking its 26th consecutive month above the pivotal 50-point mark, which distinguishes expansion from contraction. While the contribution of the manufacturing sector to GDP was 4.7% there are no particular distresses in the manufacturing domain. Factors fueling the growth include a rapid increase in new orders and output—aided by a surge in export orders—as well as attempts to mitigate potential raw material shortages through substantial inventory restocking. For instance, orders for garments have picked up in Southern India which contributes to over 60% of the market share. Maharashtra and Gujarat are also reporting high numbers, with garment manufacturers expecting double digit projected growth compared to last year. Readymade Textile Dealers Association expects 15-20% growth compared to last year on the back of high volume orders from the coming festive season.


Demand for gold is expected to surge over the next two to three months, fueled by festive seasons. Despite stagnant gold prices influenced by economic challenges in the US, industry experts are optimistic of gold’s demand, attributing it to strong stock market performance and changing consumer behaviour. Buyers are no longer purchasing gold solely for investment, they are adding to their wardrobe as a fashionable statement.

With rising income levels and purchasing power, gold is expected to have a strong festive season. Traditional shopping for gold will pick up from September to November based on historical patterns. And it’s not just festivals, but the end of the Navratri marks the beginning of India's wedding season, when demand for gold jewellery typically also peaks. Both occasions are seen as highly auspicious times for purchasing gold, making them crucial drivers for the expected rise in demand.

Travel & Hospitality

Despite escalating airfares and hotel rates, the travel industry is witnessing more than a 100% surge in demand for festival travel. There is increased interest in train journeys due to infrastructure improvement and rise in airfares. The Hospitality industry is optimistic seeing double digit growth in demand compared to last year for both leisure and city destinations. Consumers are looking for differentiated experiences and are willing to spend on premium and luxury accommodations.

Tour operators focusing on international travellers are gearing up for a bustling festive season in India, with significant demand coming in from various countries for festival-themed trips. Number of travellers attending Diwali celebrations in Varanasi has risen notably in the past year, with this year's reservations including tourists from Korea, the US, and the UK. Thai travellers are particularly interested in Ganesh Chaturthi in Maharashtra, while tourists from the US and UK are keen on celebrating Diwali in Varanasi and Rajasthan. The Pushkar Fair and Hornbill Festivals are also drawing in visitors from France and Germany. The ongoing Cricket World Cup 2023 has also contributed to the growth of the sector, with hotel tariffs increasing by 200-300% in major cities like Ahmedabad, Mumbai, and Kolkata. The upcoming festive season along with pent up travel demand means the travel industry should see high growth in the coming festival months and in the longer term as well.

Diwali and Macros

India’s Spectacular GDP Growth

Q1 FY24 GDP data showed a year-on-year real GDP growth of 7.8%, slightly lower than RBI’s 8% expectation for the quarter, but significantly higher than 6.1% in Q4 of FY23. Compared to global economies such as Indonesia’s ~5% and China’s at 4.5%, India’s GDP growth is spectacular.

The primary drivers were the services and construction sectors, which is encouraging as they are labor-intensive industries. The manufacturing sector performed moderately and has benefitted from favorable demand conditions and lower input prices, as evidenced by improved profit margins for corporates. However, this doesn’t truly reflect the underlying economic momentum in the country.The trends of low consumption demand and expanding trade deficit do cause worry.

Understanding India’ GDP Growth

  1. Government spending increased by 59% and private investment grew by 8%: Top 19 states recorded nearly 76% growth in capital expenditure. This has resulted in robust order inflows for construction, defence, railway, infrastructure etc companies. However, for this momentum to be sustainable, private investment needs to pick up, especially given the robust health of corporate and bank balance sheets and increasing capacity utilization in the manufacturing sector.

  2. Private consumption grew by 6%: Significantly up from a tepid 2.8% growth in the previous quarter. This was led mainly by urban discretionary spending, as shown by strong numbers in air and rail travel, retail credit, and passenger vehicle sales. There's also a noted increase in rural demand, which is a positive sign for broader economic health.

  3. Consumption demand is weakest with household spending at 3.6% CAGR considerably lower than the pre-Covid trend of 7% and government consumption spending at 1.8% CAGR compared to 6.2%. Lower government consumption spending can be explained by larger infrastructure spending. Inflation has become a spoilsport, eroding away purchasing power for consumers, however with the coming festive season analysts expect consumers to significantly increase spending.

  1. Expanding Trade Deficit: Exports have weakened since the start of 2023, with demand from Europe being weaker than U.S. Chinese exports are competing again. Imports expanded in double digits. This not only puts pressure on foreign reserves but could also potentially impact the country's currency value and debt levels.

Concluding Note

The festive season in India will offer many economic opportunities across various sectors including manufacturing, FMCG, e-commerce, and travel & hospitality, among others. Despite some inflationary pressures and a brief uptick in unemployment, various indicators point toward robust activity, from surges in job postings to strong sales figures across industries.

  • Job Market: The YoY growth in employment during the festive season is a positive sign for the Indian job market. It not only boosts urban employment but also has a ripple effect on smaller cities and rural areas. This offers short-term relief from the generally high unemployment rates.

  • Consumer Behavior: As the festive season nears, consumer sentiment usually becomes more optimistic, driving up sales and thereby fueling economic activity. This is a crucial factor, especially when the economy faces inflationary pressures.

  • Supply Chain: Companies ramping up production in anticipation of increased demand must ensure that their supply chains are resilient, especially given the complexity introduced by the global pandemic.

  • Inflation: While the CPI and food inflation have moderated somewhat, how this will affect consumer spending during the festive season remains to be seen. The government's assurance of sufficient essential items might stabilize prices to some extent.

Positive economic factors, businesses adapting strongly to market changes and pertinent government intervention to control inflation suggests not only a spirited festive quarter but also the potential for a ripple effect of growth and employment opportunities well into the future. All of this on the backdrop of an upcoming election cycle for India in 2024, we expect a strong festive season for companies, economies and investors!

We see our smallcases making a tilt towards the festive stocks as the momentum picks up. The Innovation and New India portfolios bet on India’s economic revival with a focus on domestic manufacturing, automobiles, e-commerce sectors and the Momentum and Alpha smallcases are bound to pick up the trending festive stocks as the momentum builds. Festivals are a Mahurat for good fortunes in the Indian stock markets and our portfolios are geared up to take advantage!

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