-Penned by Srishti Gupta
Culture, Festivals and Economics
Different cultures and thus, festivals produce vastly different economic outcomes, as do their citizens’ values and ideals. A substantial body of literature exists that demonstrates how cultural beliefs influence economic outcomes such as policy choices, trust, economic growth, institutional change, cooperation, and conflict. In recent years, there has been an increase in research on the origins and consequences of a wide range of cultural characteristics. Much of this research can be classified as historical political economics (HPE), which studies the causes and effects of cultural change over time as well as the connections between the past and the present.
There are two perspectives on sales during the holiday season, which runs from October to December. One is that sales will exceed 2019 levels; the other is that they will not and will, at best, match pre-Covid levels. The best outlook appears to be cautious optimism: 2019 levels should be reached, but maintaining them may prove difficult. From a marketing standpoint, consumers can be divided into three groups: lower-middle income, upper-middle income, and very rich. Sales at the very wealthy level have been impacted only slightly, if at all, and are expected to continue. Despite inflation, the upper middle class will spend money on things like home painting, dining out, travel, and so on. They will be concerned with branding. During the last two years, the poor and lower-middle classes have suffered greatly. In general, they have shifted to less expensive goods. Price is more important than brand. Customers have traditionally been loyal to mostly online products up until now. Customers are eager to leave their homes and interact with things in person. Cars, TVs, and refrigerators should see an increase as a result of consumers comparing them at retail establishments.
What does the 2022 festive season look like?
The following categories best describe how festival expenditures affect the economy:
Direct expenditure: All festival-related expenses incurred by consumers
Indirect impact: the additional input purchases made by local firms as a result of the direct impact.
Induced Impact: produced when local entrepreneurs, suppliers, and workers spend the extra money they made as a result of the direct and indirect effects.
Multiplier effect: how many times a rupee “changes hands” before leaving the community, which is also a measure of the velocity of money circulation.
The Indian economy has always prioritised saving, with only special occasions allowed for spending. And we are all aware of how crucial expenditure is to the growth of an economy. All facets of India’s economy get a lift from the festive spending on apparel, footwear, ornamental items, white goods, and other commodities. The holiday season is a boon for businesses across many sectors, including the auto industry. According to a statement in the Vehicle Retail Data for September 2022 report, October is expected to be the best holiday season for the passenger vehicle (PV) category in the past 10 years. This is because even higher sales are forecast for the month. During the holiday season, the housing infrastructure industries (paint, sanitary products, etc.) receive a significant boost. The festival industry is a boon to the informal economy, especially for artisans. It is their main means of surviving. Region-specific celebrations give a boost to that particular location, and they also give vendors the chance to relocate from one region to another based on the seasons. New items and designs are offered over the holiday season to assist businesses in increasing sales. This provides the fuel for innovation. At festivals, domestic and international startups can confidently test the waters of uncharted customer bases. Rising levels of competition are generally good for shoppers. As businesses ramp up their efforts in preparation for the holiday season, the organised Indian labour market has picked up speed. Increases in hiring in September 2022 were in the double digits, at 13% year-over-year and 10% monthly. The insurance market saw the greatest year-over-year expansion, at 90%. The construction, financial services, tourism, automotive, fast-moving consumer goods, and retail sectors are all important to the economy and job growth, as is the oil and gas industry. During the holiday season, online retailers see a surge in business that often multiplies their normal revenue by ten or more. Flipkart made Rs 600 crore in 10 hours during Diwali last year. The first week of the holiday season is predicted to have seen a 30% year-over-year increase in e-commerce platforms, with Tier-2 and Tier-3 towns seeing even larger e-commerce growth than Tier-1 cities. It is expected that the first week of festive sales across all e-commerce platforms in India will generate five times as much revenue as the entire year of regular sales combined. When compared to the previous year, this is an increase of nearly 1.3 times. Demand for gold and silver, which are considered auspicious in India, increases annually during religious holidays. More and more, festivals are being used as a means of marketing various vacation destinations. Visits to the site during the temporary celebration are encouraged. This is a fantastic chance for them to interact with the locals and learn about the area’s culture, customs, and atmosphere. Deloitte predicts that by August 2022, discretionary spending on things like eating out, going on vacation, and buying entertainment will have increased by 30% from April 2022 levels. The spending proclivity of consumers extends to both travel and hotel stays.
Despite the current high pricing, manufacturers are aware that offering discountswill increase volumes. Profits will be generated as costs are reduced. Customers in the middle and lower income brackets have a lot of unmet demand. They are aware that prices will fall significantly during the holiday season due to reductions. Maintaining the anticipated growth throughout the holiday season will be difficult. The 2023 budget will have a significant impact. The middle-income group has largely gone unnoticed over the last two years. The Indian government must act in February to help this group, either directly by lowering personal taxes or indirectly by lowering the centralGST on a variety of goods. Because this is the group that generates consumption, more “spend money” must be allocated to them. Increased consumption will start the growth positive feedback loop. As demand rises, manufacturers will be able to increase production while decreasing discounts. As a result, while growth will occur during the holiday season as a result of significant reductions, we must sustain this growth in the coming year through innovative approaches.
https://economictimes.indiatimes.com/industry/auto/auto-news/october-will-be-best-festive-season- of-the-decade-auto-report/articleshow/94635391.cms https://economictimes.indiatimes.com/opinion/et-commentary/view-how-india-can-sustain-growth- projected-this-festive-season/articleshow/94605638.cms https://economictimes.indiatimes.com/jobs/festive-cheer-hiring-picks-up-ahead-of-festive-season- naukri-jobspeak/articleshow/94536644.cms https://economictimes.indiatimes.com/tech/technology/tech-firm-sees-30-growth-in-e-commerce- platforms-sales-in-1st-week-of-festive-season/articleshow/94662935.cms https://www.bizzbuzz.news/opinion/understanding-the-impact-of-festivals-on-local-economy-1171655? infinitescroll=1
The Economics and International Business Club of IIM Indore
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