The Economic of Christmas Season

Rajiv Theodore
Tue, 24-12-2019 12:40:50 PM ;

Economics is the last word that comes to mind when you think of Christmas. Obviously what comes to mind is fun, music, family, food and presents. But Christmas has a significant role to play in most of the economies worldwide and India is no longer an exception.

Looking at the sheer economics of any festival, in this case Christmas, we see a huge lot of spike in spending which triggers off a massive generation in manufacturing, take for example the toy industry, the apparels, electronics, tourism and what not.  There are other hidden ancillary industry which also immensely benefits from the spin offs. On the flip side, all these festival related activities if failing to boost  consumption  the economy may just miss its chance of pump priming.

Once purely an American tradition, Black Friday and Cyber Monday have been gaining traction globally and so does  American Thanksgiving day, which is becoming one of the biggest shopping weekends in the calendar. Not only do people spend a lot at this time in the lead up to Christmas, but it’s essentially the biggest weekend for discounts in retail, too. This activity also means, retailers require more staff to deal with the busier season and an abundance of staff to man orders.

The Reliance Brands have gone on record saying that it is not Diwali, but Christmas, which brings  a sales boost. According to them Diwali is “over-rated’’ where  sales are driven more by the whims of an erratic emotion. And for Amazon and Walmart are too looking forward after slower year. The first half of this year has been slow for Amazon and Flipkart in India as they were subjected to  changes in local e-commerce policy (earlier this year), which forced both to delist hundreds of thousands of goods overnight from their marketplaces. Even the tourism industry is looking forward to the season.  The country’s foreign tourism industry is expecting a 10-15% boost this December – New Year season. This year is looking much better in terms of both actual bookings and inquiries, Indian Association of Tour Operators (IATO)'s president, Pronab Sarkar said. “With the reduction in visa fee and GST (goods and services tax), we expect a good increase in foreign tourist arrivals this Christmas-New Year season,” Sarkar added.

It must be recalled here that across most sectors, consumption has been hit harder than it was in the aftermath of the global financial crisis of 2008-09. Economic revival will need consumer spending to grow in the festive season, which is just weeks away. This season traditionally accounts for 35-40% of annual sales of consumer durables, and also sees an uptick in spends on other items. Whether government stimulus packages announced so far will have an impact on festive consumption is a big question. An even bigger question is whether consumers, who are coping with flat-lining incomes and a poor job market, will respond to the incentives offered by companies. If this festive season  fails to sparkle in terms of consumption demand growth, outlook for the next few quarters will get much gloomier.