The Festive Countdown Begins
With just a week to go before Diwali, India’s most celebrated festival and the country’s busiest shopping season, spending trends appear mixed. While car sales and e-commerce activity are showing strong momentum, other indicators point to slower overall consumer demand.
Retailers are wondering — will this year’s festival of lights bring the usual sparkle to sales or stay dim under economic pressure?
Shoppers Spend Cautiously, Despite Festive Buzz
Diwali typically triggers India’s biggest shopping wave, with consumers buying everything from cars and jewelry to clothes and electronics. But in 2025, economic sentiment is uncertain.
On one side, U.S. trade tariffs and weaker global demand are weighing on India’s urban consumption, especially in the IT and export sectors. On the other, recent tax cuts and lower duties on essential items are expected to encourage spending across middle-income households.
During September, auto dealers reported a 5.2% year-on-year rise in sales, a solid rebound from a 9% decline the same month last year. The timing difference of the festival season makes a direct comparison tricky, but early signs are positive.
During Navratri, car sales reached record highs. Mercedes-Benz India even reported selling one car every six minutes, highlighting renewed interest in premium vehicles.
E-commerce Platforms Witness Strong Traffic
Online retail has also had a strong start. Amazon India said its Diwali sale attracted 380 million visits in just two days, with nearly 70% of customers coming from smaller towns and cities.
Redseer Consulting predicts that 2025 will be the strongest year for India’s e-commerce industry in the last five years, thanks to tax cuts and deep discounts.
However, while automobiles and online shopping thrive, other sectors are not seeing the same surge.
Gold and Silver Demand Faces Headwinds
India’s love for gold remains, but skyrocketing prices have discouraged large purchases this festive season. Dealers expect some improvement in sales closer to Diwali, yet analysts say the overall gold buying trend remains weak.
According to Ambit Institutional Equities, the festive season’s growth impact might be smaller than usual due to sluggish wage growth and a soft job market.
“Tax relief will likely shift buying patterns rather than drive new demand,” Ambit’s report noted.
Interestingly, the rural economy seems stronger. Analysts from Citibank highlighted that rural India is supported by robust agricultural output, 8-year high wage growth, and a 10% rise in non-farm employment. These factors could partially offset urban slowdown.
Urban Spending Weakens Under Policy Pressures
Both Citi and Ambit analysts point out that urban wage growth, currently around 8%, remains below the 11% long-term average. This may limit spending, particularly among IT professionals, where job growth has slowed due to uncertainty in the U.S. economy.
Recent data shows a dip in air travel, hotel occupancy, and the Purchasing Managers’ Index (PMI) for both manufacturing and services. Even personal loans, a common source of festive financing, have increased at a slower pace compared to last year.
Still, economists believe lower taxes and potential interest rate cuts could help spark a recovery in the months ahead — though it’s unclear how much of that extra cash will be spent instead of saved.
Precious Metals ETFs Hit Record Inflows
Meanwhile, gold and silver Exchange Traded Funds (ETFs) have seen record-breaking inflows in September. Investors are rushing to buy precious metals amid volatile markets.
Demand for silver ETFs has been so high that several funds temporarily paused large subscriptions due to a shortage of physical metal in India. Fund managers said these restrictions would be lifted once the supply-demand gap stabilizes.
Fintech Focus: Crypto Sidestepped at Major Summit
At India’s annual Global Fintech Fest, attended by the Prime Ministers of India and the UK, cryptocurrency discussions were noticeably absent.
Organizers explicitly requested speakers to avoid political and crypto-related topics, focusing instead on India’s homegrown digital payment ecosystem.
India continues to promote its Unified Payments Interface (UPI) — now enhanced with biometric authentication — as a secure, scalable alternative to cryptocurrencies.
Globally, crypto markets faced turbulence, with prices plunging sharply last week, reinforcing India’s cautious stance.
Final Word
Despite challenges, India’s festive season continues to showcase consumer resilience. While urban demand remains fragile, rural growth and online retail strength may keep the lights shining bright this Diwali.
The India File will return on October 28 after a short Diwali break.
Happy Diwali!
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