Soaring prices dampen consumer mood

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 per cent, 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 per cent 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 per cent driven by a rise in food prices.

In September the consumer price index eased to 4.35 per cent, 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 per cent 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.