High food prices pushing customers to curtail spending ahead of festivals

Rising prices of edible oils and vegetables like onions and tomatoes have driven up grocery spending for Indian households ahead of the festival season, prompting some consumers to limit more expensive purchases like electronic items, retailers said.

India's annual festival season, which runs from late September to early November, sees households scramble to buy food and other goods, encouraged by discounts offered by both online and brick-and-mortar retailers.

But the start to the festive season this year has been slow.

Sales of electronics and home appliances so far in October have risen just 5-7 per cent from last year, against estimates for an 8-10 per cent climb, said Nilesh Gupta, director at Vijay Sales, a retail chain with 143 stores.

 

"We remain optimistic that sales will pick up," he said.

India's economy is projected to grow by 7.2 per cent in 2024-25, driven by increased rural demand, according to the central bank's estimates.

But high-frequency indicators such as auto sales and manufacturing purchasing managers index (PMI) have suggested weakness in the economy.

Retail inflation, particularly for food, has remained high, eroding disposable income.

In September, retail inflation was 5.49 per cent and food inflation at 9.24 per cent. Vegetable prices were 36 per cent higher than a year ago.

"The surge in onion prices, along with other food items, is having a ripple effect on the purchasing behaviour of small customers," said B.C. Bhartia, national president of the Confederation of All India Traders (CAIT), representing 2 million retailers.

Sanjay Kumar, 37, an office assistant who earns Rs 22,000 ($262) monthly, said: "I have cut my vegetable purchases by more than half to stay within my family budget, and I'm postponing the purchase of a microwave for Diwali."

CAIT had expected festival sales worth Rs 4.25 lakh crore, 13 per cent higher than last year, driven by rural demand.

A final tally of festival sales will only be available after the Hindu festival of Diwali in November, when purchases hit a peak.

Online sales, which account for 15 per cent of retail sales during the festive season, are also off to a slow start.

Mobile phones, a key category that sells online, have seen weakness in sales of entry level models, indicating "continued income stress on low income groups," though premium handsets were selling better, said Pushan Sharma, director of research at Crisil Market Intelligence and Analytics.

Bangalore-based consultancy Redseer was more optimistic, estimating online festival sales of Rs 1-1.2 lakh crore, up 20 per cent on the year, against 13 per cent growth last year.

Major retailers like Reliance Retail, Amazon, and Walmart owned Flipkart are offering discounts and easy credit deals to attract customers.

Fashion, a key sales category during the festive season, saw weak demand in July-September, Dinesh Taluja, senior executive at Reliance Retail, told analysts this week.

"But sales have picked up," he said.