Have you noticed the sudden change in the volume of economic activities around a festival? Sudden spike in expenditures on clothes, jewelleries, footwear, eating out, and what not … around the festive days, tend to boost the firms in the consumer discretionary segment. And the spend is not just on products but is on services too such as tourism, salons etc.
Conventionally the festive season in India, particularly Durga Puja and Diwali, spurs heightened consumption and investment. During this period, a wide array of sectors from apparel to electronics, witnessed noteworthy upsurge in sales. Artisans, especially in rural sectors, witness significant increase in demand for their unique products (Srivastava, 2023).
Figure 1: Return on India Consumption Index (Srivastava, 2023)
The Disney+ Hotstar Festive Sentiment Survey Report (2024) reveals that consumers are expected to ramp up their spending, with an average budget of ₹ 25,000, marking a substantial 47% increase compared to the previous year.
Figure 2: Nature of Consumer Spending During Festivals (Disney + Hotstar, 2024)
Are all these expenses essential?… No. Nevertheless, barring a very small if not insignificant percentage all will spend during these days, in varying quantities, on articles that are not essentials, and some of them … actually many of them can be categorised as luxuries.
So why do we spend? It' s a herd mentality – every one buys new clothes during the Durga Puja is West Bengal or during Diwali in India, even if they may have enough clothes .. even new ones. They would spend on exclusive collections, on designer wears, on expensive outfits as per their spending capacity. An apparel seller can get away with unreasonable prices if he / she is able to tap the market. The profit margins can rise along with the expanding sales volume. People would buy all sorts of consumer products, big or small, expensive or inexpensive, for themselves, for family and for gifting. Some spendings are even considered auspicious and believed to bring in prosperity like spending on Danteras.
People would buy Gold and Silver coins, jewellery, etc. during Diwali and Dhanteras even if the prices rise sharply during these days on raging demand. Presently, in India, Gold prices are surging with the investors responding to a mixture of festive demand and global market dynamics (Anshul, 2024).
Festivals Boost Economies
Festivals have a substantial impact on economies at both local and national levels. They can and do boost an economy in several ways, including:
Increased consumer spending
During festivities, people tend to buy new apparels, accessories, decorations and for both self-consumption and gifting which raises demand for consumer goods and services, which in turn boosts sales and production (John, 2023).
Think about the Durga Pujas in West Bengal. Consumer spending scales up quickly. Then there are the locality pujas which undertake massive spend on erection of pandals, on the idols, on hiring the priests, on decorations, on 'dhakis' (people paying leather instrument called the dhak during the pujas), on massive volume of flower and other ingredients for pujas, on hiring cooks for cooking meals for the goddess which is then distributed to the local community, vegetables, fruits, groceries, packaging materials, lightings and other materials needed for decorating the whole locality; the list is endless.
Fuelling e-commerce growth
These festivals also result in a massive surge in e-commerce platforms, where bigwigs such as Amazon and Flipkart provide extensive festive sales and discounts enticing a huge volume of online shoppers. For instance, in the calendar year 2023, during the festive season, e-commerce sales reflected a significant increase in numbers. This surge in online shopping is not just limited to urban areas but has penetrated markets in both urban and rural India, which underscores the extensive reach of digital platforms during the festive season (Gupta, 2024). Swiggy and Zomato would give away enticing discounts to users on food and groceries drawing huge volumes of consumers. Spending all around goes up.
Increased tourism along with destination promotion
Festivals also have the capacity to attract visitors who spend generously on food, transportation, accommodation, entertainment, and retail purchases. Additionally, schools and colleges remaining closed during these days several families, individuals including working professionals would travel back to their hometowns or go on a vacation during these days driving the earnings of businesses such as tourism, hospitality and transportation.
Festivals, such as the Durga Puja in West Bengal, Dusherra celebrations in Mysore, Diwali in North India, etc. have the capacity to draw tremendous volume of tourists (both national and international) and this influx of tourists besides benefiting the festival itself also promotes the region as a tourist destination.
Supporting small businesses
Festivals offer a platform for small vendors, artisans, and temporary workers thus supporting the informal economy. In today's rapidly changing economic landscape, small businesses hold the key to fostering sustainable growth and driving local economies. Festivals present the opportunities for small-scale businesses to showcase and vend their products or services. Local food vendors, craftsmen, artisans, and performers often participate in festivals, giving them a platform to promote their products and services to a bigger audience which expands their reach. Such exposure is extremely conducive towards increasing sales and bringing in long-term business growth.
Free marketing of products and services
Festivals also offer the scope for free advertising for local, regional and national businesses through visitors sharing their experiences on social media. Various companies will spend a lot in putting up hoardings, advertising their products and services in the nearby areas and in every locality. It is like a separate carnival at every locality with its own theme and line of spending. Every venue offering a unique platform to showcase. The volume of spending is massive.
Improvement in cohesion within the community
Festivals have the capacity to strengthen social ties and enhance community pride. They bring together an array of businesses, organizations, and community members. Such an environment is conducive to collaboration and networking among small and medium businesses (SMBs). They can go in for partnerships, resource sharing, and knowledge enhancement by learning from each other's experiences. Such collaborations have the potential to bring in growth and development of small businesses, through their exposure to novel markets and ideas.
Fostering entrepreneurship & creating employment
Festivals also offer a platform to the local artists, musicians, and vendors to exhibit their talents. Each and every festival has requirement of services and support, which generally is expansive and would include a wide array of services, for instance event management, decorations, logistics, transportation, catering, and security. The phenomenon generates employment opportunities, though temporary, that benefits the local workforce. Such small and medium businesses as event planners, decorators, caterers, and logistics and rental companies, generally acquire contracts for providing these services, which results in additional revenue and job creation.
Direct and Indirect Impacts of Festivals
The economic impact of festivals can be direct, indirect, or induced. Direct effects include the preliminary change in the economy, for instance expenditure undertaken by people attending the festival. Indirect and induced impact of festivals include the economic activities that are produced by the businesses all over the region, even if they do not have visitors specifically for the festival.
Conclusion
Festivals act as a boon for the economy. Their durations may be short but the impacts can linger for quite some time in the form of the boost to the economy that they generate. Everyone will not spend alike neither will every person in the region spend but a significant majority will, according to their income ranges. It is this consumer spending that pushes the economy.
To conclude we can say that festivals make significant contribution to the regional economies and support small and mid-sized businesses by pushing up consumer spending manifold, offering novel business opportunities to local and regional businesses, creating employment, facilitating collaboration and networking, promoting hospitality and enhancing tourist inflows and boosting the region as a tourist destination, besides fostering community engagement and engendering pride in the natives. The collective effects have the potential to impact economic growth and sustainability of small-scale businesses within the area, substantially and positively.
References
Anshul, 2024. Gold prices trade near all-time high: A look at factors driving the rates | CNBC TV18. [Online] Available at: https://www.cnbctv18.com/personal-finance/gold-prices-all-time-high-record-level-india-diwali-dhanteras-demand-outlook-19494400.htm/ [Accessed 21 Oct 2024].
Disney + Hotstar, 2024. Decoding the Festive Shopping Sentiment of Indian consumers, s.l.: Disney + Hotstar.
Gupta, A., 2024. Festival Fortunes: Impact on Economy | India Tracker. [Online] Available at: https://www.indiatracker.in/story/festival-fortunes-impact-on-economy- [Accessed 07 Oct 2024].
John, D., 2023. How Festival creates boom in the economy | Dennis Piper. [Online] Available at: https://blogs.oregonstate.edu/piperde/2023/06/19/how-festival-creates-boom-in-the-economy/#:~:text=Boost%20in%20Consumer%20Speding,and%20joy%20of%20the%20occasion. [Accessed 07 Oct 2024].
Srivastava, S., 2023. Festive Season Forecasts a Bright Spark for India's Economic Revival | Wright Research. [Online] Available at: https://www.wrightresearch.in/blog/festive-season-economic-revival-india/ [Accessed 23 Oct 2024].
