Soaring prices dampen consumer mood in India's festival season

Value Exchange International

21/10/2021 08:00

By Manoj Kumar and Sunil Kataria
    NEW DELHI, Oct 21 (Reuters) - For Delhi resident Suman
Milind, rising prices in India are casting a long shadow this
year over the upcoming Diwali festival of lights.
    The 33-year-old homemaker is tightening her purse strings
and altering her spending habits, thanks to soaring costs of
fuel, transport and many manufactured items, coupled with
stagnant incomes due to the pandemic.
    "Earlier we used to get four or five boxes of dry fruits
during festivals, but now we hardly get one or two. Because of
the high prices," said Milind, adding that her family has
reduced spending on food too by cutting back on meat to just
once a week compared to several times a week earlier.
    Millions of Indian households are facing similar strains on
their budgets ahead of Diwali, which this year falls in early
November and marks the country's busiest shopping season for
consumer goods.
    Many are foregoing big-ticket purchases such as television
sets and jewellery this festive season, according to half a
dozen people Reuters spoke to and a consumer survey by
Mumbai-based consultancy Axis My India, threatening to slow an
economy recovering strongly from the worst of COVID-19. 
    Pump prices of petrol and diesel are up nearly 35% from a
year ago and cooking gas by more than 50%, severely hitting more
than three-quarters of households, economists said.  
    "The sky-rocketing prices of petrol, cooking gas are
unbearable when our earnings are still down by nearly 30% from
the pre-pandemic period," said Sultan Singh Tomar, 53, who
supplies incense sticks and kitchenware to shops in New Delhi on
his scooter.
    He said his petrol bill was up by 600 rupees ($8) from a
year ago and refilling the cooking gas cylinder was costlier by
400 rupees.
    Tomar is among millions of people working in the informal
sector who dipped into savings during the pandemic and are now
forced to pare back household spending.
    For months India's consumer-price-based inflation stayed
above the central-bank's comfort level of 6% driven by a rise in
food prices. 
    In September the consumer price index eased to 4.35%, helped
by a softening of food prices which make up nearly half of the
index. Economists said that painted a better picture than what
households are actually facing.
    According to an October report by Axis My India on consumer
spending trends, more than 88% of respondents in a survey said
they will not be buying air conditioners, televisions, washing
machines or jewellery this festival season and nearly half said
they will make low-ticket purchases such as clothes.
    There is not much that Prime Minister Narendra Modi's
government can do to alleviate the pain as global crude oil
prices hit a three-year high at $85 a barrel, piling up the
pressure on a country that imports 80% of its oil.
    Bidisha Ganguly, chief economist at industry chamber,
Confederation of Indian Industries, said federal and state
governments should cut fuel taxes, the highest among the major
economies, as higher fuel prices posed a risk of building up of
medium term inflationary pressures.
    "(Otherwise) corporate earnings will be impacted in sectors
where producers are unable to pass on the cost increases," she
said, adding global shortages were already driving up commodity
costs for many products.   
    
    REDUCED FOOTFALLS
    Private economists have warned that annual
wholesale-price-based inflation - a proxy for producers' prices
- staying in double digits for sixth months in a row could
further fuel inflationary pressures as companies pass on rising
costs to consumers.  urn:newsml:reuters.com:*:nL1N2RA0C4
    Already some retailers said rising raw material costs were
impacting their sales.
    "Our sales are not even half of what we used to have during
the festival period," said Kawaljit Singh, who sells utensils
from a shop in Chandani Chowk in the old quarter of Delhi.
    He said a rise in prices of metals like steel and copper had
pushed up prices of utensils, cookers, festival lighting and
gift items by 15%-20% in the last four-five months. 
    Because of rising prices and other market uncertainties,
Delhi-based company auditor Lalit Vats said his family had
downgraded to non-branded products and visited the wholesale
markets to hunt for bargains.
    "Government can talk about easing of inflation, but people
know that costs of every item has gone up," lamented his mother
Anita Vats.
 ($1 = 75.0900 Indian rupees)

 (Reporting by Manoj Kumar; Editing by Sanjeev Miglani and
Muralikumar Anantharaman)
 ((manoj.kumar@thomsonreuters.com; +91(11) 49548029;))