By Kalyani Shankar
In India, festivals are more than just celebrations; they are significant traditions. Families often spend a considerable amount on new clothes, sweets, decorations, and gifts during these times.
However, rising prices and inflation are forcing consumers to adjust their budgets and shopping habits. Many families are choosing to celebrate on a smaller scale and are seeking bargains. Key food items like onions, garlic, and ginger have experienced substantial price increases due to irregular weather patterns.
Additionally, global crude oil prices are rising, and the Indian rupee is weakening. This has increased transportation and mineral oil costs, with wholesale mineral oil prices up about 40% from last year.
Core inflation has risen to 4.6%, affecting the prices of food, fuel, services, and goods. Addressing inflation effectively requires more than monetary policy alone; it also needs coordinated fiscal measures, including managing liquidity, adjusting taxes, and reforming agriculture and supply chains.
The Reserve Bank of India’s Monetary Policy Committee has raised the repo rate by 25 basis points to 5.50%. This marks the first rate increase in nearly four years. The shift from “calibrated tightening” to “neutral” suggests that rate cuts are unlikely in the near future. Rising food prices, driven by Middle East conflict and poor monsoon conditions, have heightened inflation concerns. As a result, expectations indicate more than 100 basis points of additional rate hikes over the next year. In September, wholesale inflation rose to 11.39% from 9.92% in August, mainly driven by a 57.32% increase in oil prices.
RBI chief Sanjay Malhotra said future rate hikes will depend on growth and inflation trends. A key question remains: how much of the price increase that suppliers accepted in September will impact consumer prices and electricity bills?
Economic challenges during the festive season can affect small businesses reliant on sales. Rising prices may squeeze profit margins, but they also highlight the value of handmade goods. By offering unique, high-quality products, local vendors can attract consumers seeking authenticity.
Global supply chain issues and domestic policies have significantly influenced inflation in India. In September 2023, the Reserve Bank of India reported a Consumer Price Index (CPI) inflation rate of 6.2%, above its target range of 2-6%. This increase is primarily due to higher prices for food, fuel, and essential goods, with food inflation around 7.8%.
Recent initiatives have included tax cuts and subsidies on essentials such as cooking gas and grains. The Food Corporation of India has ramped up procurement efforts to ensure steady supplies and mitigate inflation ahead of the festive season.
The Reserve Bank of India (RBI) projects a 7.1% economic growth rate for 2026-27, with retail inflation expected at 5.2%. However, inflation may rise to 6% in the last quarter of the year, from October to December. The RBI chief emphasised that while the economy is strong, rising inflation remains a concern.
Retailers are adapting to these economic trends by emphasising value for money through bundled deals and discounts on essentials. This approach has boosted mid-range products by 15%, while demand for luxury items has decreased. Local markets and artisans are adjusting to these economic challenges, with the festive season accounting for about 30% of their annual revenue.
Social media platforms such as Instagram and Pinterest are flooded with tips that encourage creativity and resourcefulness during this time.
The government has implemented tax cuts and subsidies for essential items like cooking gas and grains. The Food Corporation of India has also increased its procurement efforts to maintain a steady supply. These measures aim to curb inflation as the festive season approaches.
The Ministry of Consumer Affairs has launched campaigns to educate consumers about price trends and provide buying guidelines, ensuring that economic challenges do not overshadow celebrations.
Global food inflation is expected to rise until 2027 because of shipping disruptions, high fertiliser costs, and El Niño’s effects. Prices for Indonesian rice and Indian sugar have reached record highs, and Egyptian bread prices have increased by 25%. Shrinking stocks and higher imports are projected to drive further price hikes. In its latest report, the RBI noted differences in inflation rates between rural and urban areas, with rural areas experiencing higher inflation.
To address these issues, it is essential to improve the storage, processing, and distribution infrastructure for perishables like vegetables. Additionally, reducing dependence on edible oil imports by increasing domestic oilseed production is crucial. Addressing bottlenecks in agriculture, logistics, and food processing sectors is necessary. Expanding access to formal financial services can also help reduce price volatility in the informal sector.
Amid these challenges, consumers and businesses continue to demonstrate resilience and creativity during the festive season. (IPA Service)
