Diwalinomics – the term explaining how a ‘rational’ consumer’s choices and demands suddenly become so irrational that it completely defies all the traditional economic and finance theories developed, leading to the rise of behavioural finance. Our social media accounts and notification centres along with the big hoardings are often bombarded with heavy discounts which are in line with many of the marketing gimmicks surfacing around Diwali.
Bonus fills up the pockets and every Indian “Rational Consumer” feels the need to celebrate the festival of lights with new apparel, electronics, furniture, share trading or gold and other precious metals.
Diwali is the festival during which a consumer’s festive vibes get intertwined with the joys of investments and spending.
Muhurat trading is another term coined to describe the increase in stock market activity where Indians indulge in buying shares as it is considered an auspicious time to start anything new and investments. Stock markets are coloured ‘Green’ just like the diyas lighten to signify the joys around Diwali. It is believed that trading during the muhurat (i.e., the auspicious hours) brings prosperity and financial growth to the person. Companies often release their financial reports along with dividends and bonus which brings out the positive sentiments associated with Diwali, influencing the stock prices and investment decisions.
Gold and Jewellery also see a boost in their sales. Dhanteras, the first day of the five-day Festival of Lights, is considered an auspicious time to purchase gold & and jewellery. Indians don’t consider Gold only as an investible asset but as a symbol of wealth, luck, purity and prosperity. India’s gold consumption often peaks during the months of October and November which hosts the festivals of Diwali and Dussehra. The Gold and jewellery purchased during Diwali to offered to Goddess Laksmi, the goddess of wealth, to usher in more wealth.
The travel and Tourism industry often sees a surge in demand for domestic and international destinations. The festive season is synonymous with family reunions, and this often translates into increased travel. The tourism and hospitality industry witnesses a spike in bookings as people embark on journeys to be with their loved ones. Popular tourist destinations experience higher occupancy rates, contributing to increased revenue for the sector. Diwali is a time for feasting and social gatherings. As a result, there is a surge in spending at restaurants, hotels, and catering services. The hospitality industry experiences increased demand for event venues and catering services during the Festival of Lights.
Consumer goods and confectionary industries experience a big boost in demand during Diwali since it is synonymous with gifting and shopping. Indian consumers take up a head start in shopping for gifts for their loved ones.
Movie releases, shows, and other live events are strategically organised around the days of Diwali. Filmmakers and event organisers take advantage of the Indian consumer’s festive spirit and the extra leisure time with family bonding time to launch big-budget blockbusters, comedies, musicals, sports events like cricket World Cup matches and more. The entertainment sector gets a kickstart on its profit during the Hindu New Year.
The festival of lights also brings about a sparkle in the real estate sector. Diwali is often seen as an opportune time to make significant investments in property. Families consider it an auspicious beginning, marking the start of new ventures and fresh investments. The real estate market witnesses a flurry of transactions, with individuals and businesses capitalizing on the positive sentiment associated with the festival.
The festival spirit, coupled with various promotions and discounts offered by automobile manufacturers and dealerships, leads to a surge in demand for cars and two-wheelers. Many individuals see Diwali as an auspicious time to bring home a new vehicle, contributing to a boost in sales.
The unorganized sector, comprising local vendors and small businesses, benefits from the increased footfall and consumer spending during the festive season. These businesses witness a boost in sales as people shop for gifts, clothing, and festive essentials. Small-scale industries and artisans producing handcrafted items, such as diyas, decorations, and traditional clothing, experience heightened demand. This period becomes an opportunity for these artisans to showcase their skills and generate income. The festive season, including Diwali, often brings temporary employment opportunities for the unorganized sector. Businesses involved in the production of festive goods, handicrafts, and traditional products may hire additional labour to cope with the heightened demand. This provides a source of income for many individuals, particularly in rural areas.
The heightened demand for goods and services during Diwali leads to a parallel surge in job opportunities. Industries such as retail, hospitality, and manufacturing witness an increased need for manpower to meet the rising demand. Diwali becomes not just a festival of lights but also a beacon for job creation, offering temporary employment to many.
Diwali’s positive sentiment extends beyond cultural and familial spheres to influence financial markets. Investor confidence receives a boost during this time, translating into increased market activity. Companies often experience higher stock valuations and trading volumes as the festive fervour spills over into the world of finance.
The Foreign Exchange Reserve of the country also rises due to the inflow of foreign exchange in the form of gifts from loved ones to their family members.
The combined effect of increased investments and consumer spending contributes significantly to the country’s Gross Domestic Product (GDP). The festive season, with Diwali at its forefront, acts as a catalyst for economic growth. The surge in economic activities during this period had a lasting impact on the overall economic health of the nation.
Diwali goes beyond its cultural and spiritual significance; it plays a pivotal role in shaping economic activities. The festival serves as a barometer for consumer sentiment, influencing investments and spending patterns across various sectors. As individuals come together to celebrate the triumph of light over darkness, the economy too basks in the glow of increased financial activity and optimism.
As the lights of Diwali illuminate homes and hearts, they also illuminate the intricate interplay between culture, tradition, and commerce. Investments and spending during this festival not only reflect individual aspirations but collectively contribute to the narrative of abundance, growth, and prosperity, creating a tapestry of economic vibrancy that echoes far beyond the festive season.
Wishing everyone a Happy Diwali and Prosperous New Year!
Written by – Abhishek Sinha
Edited by – Krati Nitin