Rising Grocery Spending in India

By Manoj Kumar

NEW DELHI (Reuters) – Rising prices of edible oils and vegetables such as onions and tomatoes have increased grocery spending for Indian households ahead of the festival season, prompting some consumers to limit more expensive purchases like electronics, retailers reported.

India's annual festival season, stretching from late September to early November, witnesses a rush of shoppers buying food and other goods, encouraged by discounts offered by both online and offline retailers. However, this year, the start of the festive season has been slow.

In October, sales of electronics and home appliances have risen by just 5-7% compared to last year, falling short of estimates for an 8-10% increase, according to Nilesh Gupta, director at Vijay Sales, which operates 143 stores. "We remain optimistic that sales will pick up," he added.

The Indian economy is projected to grow by 7.2% in 2024-25, driven by increased rural demand, as estimated by the central bank. However, key indicators like auto sales and manufacturing purchasing managers index (PMI) have indicated some economic weakness.

Retail inflation, particularly in food, has remained high, eroding disposable income. In September, retail inflation stood at 5.49% while food inflation was at 9.24%, with vegetable prices 36% higher than a year ago.

B.C. Bhartia, national president of the Confederation of All India Traders (CAIT), which represents 2 million retailers, mentioned that the sharp rise in onion prices, amongst other food items, is impacting the purchasing behavior of small customers.

Sanjay Kumar, a 37-year-old office assistant with a monthly income of 22,000 rupees ($262), 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 previously expected festival sales to amount to 4.25 trillion rupees, representing a 13% increase from the previous year, driven mainly by rural demand. The final sales figures will only be known after the Hindu festival of Diwali in November when purchases typically peak.

Online sales, contributing to 15% of retail during the festive season, have also seen a slow start. Mobile phones, a crucial online category, have experienced weaker sales for entry-level models, indicating continued income stress among low-income groups. However, premium handsets remain popular, as highlighted by Pushan Sharma, director of research at Crisil Market Intelligence and Analytics.

Bangalore-based consultancy Redseer remains optimistic, anticipating online festival sales to reach 1-1.2 trillion rupees, a 20% increase from the previous year, compared to 13% growth last year. Major retailers like Reliance Retail, Amazon, and Flipkart are offering discounts and easy credit terms to attract shoppers.

Fashion, a significant sales category during the festive season, faced weak demand from July to September, although Dinesh Taluja, senior executive at Reliance Retail, noted that sales have since picked up.

> $1 = 84.0040 Indian rupees