Festive demand in India is uneven as inflation and price rises hit shoppers

what happened

Moody's reports that India's consumer economy is growing unevenly ahead of Diwali. Citing Deloitte's Consumer Signals report, it says food and grocery sales rose about 12% year on year in the latest months with data, apparel gained 10% in August, and durables and electronics grew 7%. Jewellery sales slowed from above 8% in August to just over 4% in September, according to the Retailers Association of India, which links the drop to festivals moving from the second quarter into the third.

Higher oil and commodity costs are squeezing consumer goods makers, and Brent above $110 a barrel is a serious burden for India, which buys almost 90% of its crude abroad. Tighter policy could also make big purchases such as cars and homes more expensive to finance as loan repayments climb. Mint reported that laptop sales may see their steepest festive-season decline as memory-chip costs push up shelf prices.

Deloitte South Asia says rural and mass-market buyers are spending more, while affluent urban households have become more careful amid geopolitical uncertainty and softness in services. Air-conditioner sales are holding up, with Blue Star reporting 42% growth in room AC sales in the September quarter.

why it matters

For markets the picture is mixed: staples and mass brands look more resilient, but higher input costs and rates could restrain spending on discretionary purchases in cities. Investors in Indian consumer shares will focus on quarterly results and on how companies manage rising raw-material costs.

market impact

Indian consumer stocks: rising costs and prices weigh on urban demand, while mass segment holds up

tags

instruments