Moneycontrol Pro Panorama | Will the festive season sparkle continue?

Interest rate cuts and lower inflation should leave more money in the hands of consumers and fuel demand, even after the festive season.

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India’s festive season has got an additional boost from the sharp GST cuts. Indian automobile sales, a potent signal of consumption demand, touched record levels in September. Manufacturers increased vehicle despatches to meet rising customer demand during the festive season. Tax cuts boosted sales across cars, scooters, motorcycles, and three-wheelers. This positive trend is expected to continue, supported by improved affordability and rural market growth.

Over the last few days, media headlines have been tracking record festive season sales in various segments of consumer goods. After two dull years, the festive season witnessed glitzy malls, teeming crowds in retail stores of automobiles and white goods and heightened e-commerce activity signalling that consumer demand is back to fire economic activity.

The automobile sales data, a key indicator of discretionary demand, indicated that sales of cars, scooters, motorcycles and three-wheelers reached their best-ever mark for September. Sales of white goods -- televisions, air conditioners and washing machines -- too surged, with some dealers reporting doubling of sales when compared to the year-ago period. In fact, the demand surge and improved consumer sentiment, as reflected in the footfalls at retail outlets, higher e-commerce transactions for personal care products and garments and even food products, suggest that this year’s festive season is indeed celebratory.

A report by SBI Capital Markets notes that the 9.1 percent year-on-year rise in September’s GST collections shows buoyant demand on the back of efficient pass-through of tax cuts to customers. It also highlights robust e-way bill generation, high petrol and diesel sales and freight movement, which together reiterated festive mobility in September. Forecasts are that the heightened festive cheer would continue during Diwali in October.

But beyond the sparkle, there are some smoke signals that warrant a cautious outlook ahead. The Reserve Bank of India (RBI) no doubt revised its FY2026 GDP growth forecast to 6.8 percent from the earlier 6.5 per cent. However, a closer look shows that the quarterly numbers indicate slower growth in the second half of FY2026 (7.8 percent in Q1, 7 percent in Q2, 6.4 percent in Q3, and 6.2 percent in Q4). Perhaps this could be explained by some moderation in sustained urban demand, although rural demand is seen to be doing the heavy lifting even in this festive season.

The belief among policymakers for now is that the GST rate cuts, interest rate cuts and lower inflation should leave more money in the hands of consumers and fuel demand, even after the festive season. However, the shadow of job losses particularly among the urban Indian youth is a spoke in the wheel of consumption. The Data Story in today’s edition is an interesting analysis of the Periodic Labour Force Survey (PLFS) for September. A key finding that could impact incomes and consumption ahead is the youth unemployment rate in urban areas that has gone up from August to September. Also, the sharp 50 percent tariffs imposed by the Trump administration on Indian exports have raised alarms about job losses.

On another note, while the International Monetary Fund has raised its forecast for India’s gross domestic product growth in FY2026 to 6.6 percent, up 0.2 percentage points, the 0.2 percentage points downward revision from its earlier estimate to 6.2 percent for FY2027 indicates a slowdown, albeit on a strong base. Do read this related article by Manas Chakravarty which decodes IMF’s latest reports that reveal a global economy holding firm on the surface, but hiding deeper financial vulnerabilities that should not be ignored.

In short, while festivals the world over are marked by heightened consumer spends, the true test of improved economic activity lies in sustained demand. A crucial indicator is the management commentary following the September quarter results, by which time the festive season euphoria should have tapered.

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Vatsala Kamat
Moneycontrol Pro