India's festival season could bring pick up in demand, says ICRA

MUMBAI (Reuters) - India's upcoming festive season raises hopes for consumer demand picking up, rating agency ICRA said in a note on Monday, while noting the "unconvincing" performance of high frequency indicators so far this month.

"It appears that the temporary boost, provided by the easing of state-wise restrictions after the second wave of COVID-19 ebbed, petered out," said Aditi Nayar, chief economist at ICRA, the Indian unit of Moody's Investors Service.

"While the early trends for September 2021 are unconvincing, we are cautiously optimistic that rising confidence will amplify demand during the festive season."

Big ticket purchases like automobiles, electronics and even real estate tend to pick up pace during the festive season, which begins in October, but concerns over a potential third wave of coronavirus infections has kept consumer sentiment subdued.

 

Relative to the pre-pandemic levels, diesel consumption, two-wheeler output, vehicle registrations and domestic passenger traffic recorded lower volumes in August 2021, ICRA said.

While the performance of passenger vehicle production and ports cargo traffic was flattish, the GST (goods and services tax) e-way bills, non-oil merchandise exports, Coal India's output, rail freight, electricity generation and petrol consumption recorded an encouraging expansion in August 2021, relative to August 2019, the report said.

"Looking ahead, with a gradual improvement in the economic situation, the waning impact of high healthcare costs related to the second wave and the improvement in the coverage of COVID-19 vaccines, confidence levels should improve," Nayar said.

"This should enhance consumption during the festive season, manifesting a perceptible improvement in the performance of the high frequency indicators in October 2021."

 

(Reporting by Swati Bhat; Editing by Simon Cameron-Moore)