INDIA`S retailers look set for a tough annual religious festival season – traditionally a time for exuberant spending as high inflation and interest rates force consumers to tighten their belts.
The season, which began with the end of the Muslim holy month of Ramadan on August 31, and ends with the Hindu festival of lights, Diwali, in late October, is seen as a lucky time for big purchases from cars and property to gold.
But analysts warn that expenditures could be curtailed this year as the country`s economy slows under the brunt of nearly a dozen interest rate hikes in 18 months, aimed at taming nine per cent-plus inflation.
"High-value purchases and where borrowed money is involved could slow down," Siddhartha Sanyal, chief India economist with Barclays Capital said.
India posted its slowest economic growth in six quarters last week, with output up 7.7 per cent year-on-year as expansion was hit by the longest stretch of monetary tightening in a decade.
"I won`t buy the car for another year. It`s too costly," Kapadia said.
Indian car sales are viewed as a barometer of the national`s overall economic health. Car sales slumped 16 per cent year-on-year to 133,747 units in July – their biggest drop in nearly three years as high interest rates and rising fuel prices kept buyers out of showrooms.
"The next wave of buying will come only when incomes rise or consumers find a good deal," said auto analyst Mahantesh Sabarad of Fortune Equity Brokers in Mumbai.
Ajit Joshi, chief executive of Tata Group`s Infiniti Retail, which runs the electronics megastore Croma, described the current market as "challenging".
He warned that discounts alone, normally offered during the festival period, would not necessarily boost sales.
"Demand is likely to be fairly good this season," said Rajesh Mehta, chairman of Bangalore-based Rajesh Exports, India`s largest jewellery maker and exporter by volume.
