Festive Cheer

Higher disposable rural income and easy availability of consumer financing schemes could bring in more sales this season

Sandipan Chatterjee

Despite the falling rupee, rising crude prices and a muted job environment, this festive season promises to be better than the previous two years as companies in the consumer durables, FMCG, retail and e-commerce space put demonetisation and GST behind them.

In fact according to RedSeer Consulting, e-commerce companies including Amazon and Flipkart have garnered nearly around $2 billion in sales, an increase of 64% over 2017 where they generated $1.4 billion in sales. The surge in sales was driven by new customers from tier II and tier III towns and financing and exchange schemes which made more products affordable.

For consumer durable companies, festival period sales account for nearly 25-30% of overall annual sales and almost all of them expect to clock better numbers this season due to reduction in GST rates for consumer durables and easy availability of financing schemes. GST rates for electrical appliances were reduced from 28% to 18% in July this year making washing machines, refrigerators and televisions cheaper.

However, the depreciating rupee has bumped up input costs for consumer durable companies, but most of them have held back price hikes for the festival season, to lure buyers. 

Due to increasing fuel prices and insurance costs, auto sales have been muted with a modest 7% increase in the first half of FY19. OEMs are now offering significant discounts ranging from ₹25,000 to ₹50,000 depending on the car. The companies are banking on a slew of new launches, model upgrades (about 26 launches planned against 17 last year) to drive up sales during the festive season.

No festive season is complete without the purchase of gold. Indians bought nearly 240 metric tons during the last quarter for the past four years, according to the World Gold Council. However, with gold prices being the highest they have been in the past two years thanks to the weaker rupee, gold purchases this Diwali could be slightly muted compared to last year. But given Indians' love affair with gold, jewellers are still banking on a good season.  

With elections around the corner and the government putting more money in the pockets of rural consumers by increasing minimum support prices, this festive season is bound to bring more cheer for consumer companies.