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Correspondent

23 August 2024 at 4:29:04 pm

Festive Surge

India’s bazaars have glittered this Diwali with the unmistakable glow of consumer confidence. The country’s festive sales crossed a staggering Rs. 6 lakh crore with goods alone accounting for Rs. 5.4 lakh crore and services contributing Rs. 65,000 crore. More remarkable still, the bulk of this spending flowed through India’s traditional markets rather than e-commerce platforms. After years of economic caution and digital dominance, Indians are once again shopping in person and buying local....

Festive Surge

India’s bazaars have glittered this Diwali with the unmistakable glow of consumer confidence. The country’s festive sales crossed a staggering Rs. 6 lakh crore with goods alone accounting for Rs. 5.4 lakh crore and services contributing Rs. 65,000 crore. More remarkable still, the bulk of this spending flowed through India’s traditional markets rather than e-commerce platforms. After years of economic caution and digital dominance, Indians are once again shopping in person and buying local. This reversal owes much to policy. The recent rationalisation of the Goods and Services Tax (GST) which trimmed rates across categories from garments to home furnishings, has given consumption a timely push. Finance Minister Nirmala Sitharaman’s September rate cuts, combined with income tax relief and easing interest rates, have strengthened household budgets just as inflation softened. The middle class, long squeezed between rising costs and stagnant wages, has found reason to spend again. Retailers report that shoppers filled their bags with everything from lab-grown diamonds and casual wear to consumer durables and décor, blurring the line between necessity and indulgence. The effect has been broad-based. According to Crisil Ratings, 40 organised apparel retailers, who together generate roughly a third of the sector’s revenue, could see growth of 13–14 percent this financial year, aided by a 200-basis-point bump from GST cuts alone. Small traders too have flourished. The Confederation of All India Traders (CAIT) estimates that 85 percent of total festive trade came from non-corporate and traditional markets, a robust comeback for brick-and-mortar retail that had been under siege from online rivals. This surge signals a subtle but significant cultural shift. The “Vocal for Local” and “Swadeshi Diwali” campaigns struck a patriotic chord, with consumers reportedly preferring Indian-made products to imported ones. Demand for Chinese goods fell sharply, while sales of Indian-manufactured products rose by a quarter over last year. For the first time in years, “buying Indian” has become both an act of economic participation and of national pride. The sectoral spread of this boom underlines its breadth. Groceries and fast-moving consumer goods accounted for 12 percent of the total, gold and jewellery 10 percent, and electronics 8 percent. Even traditionally modest categories like home furnishings, décor and confectionery recorded double-digit growth. In the smaller towns that anchor India’s consumption story, traders say stable prices and improved affordability kept registers ringing late into the festive weekend. Yet, much of this buoyancy rests on a fragile equilibrium. Inflation remains contained, and interest rates have been eased, but both could tighten again. Sustaining this spurt will require continued fiscal prudence and regulatory clarity, especially as digital commerce continues to expand its reach. Yet for now, the signs are auspicious. After years of subdued demand and inflationary unease, India’s shoppers appear to have rediscovered their appetite for consumption and their faith in domestic enterprise. The result is not only a record-breaking Diwali, but a reaffirmation of the local marketplace as the heartbeat of India’s economy.

Capital Dreams

Maharashtra has become the first Indian state to set up an Infrastructure Investment Trust (InvIT) of its own. Dubbed ‘MahaInvIT, the initiative will transfer selected assets from the Public Works Department, the Maharashtra State Road Development Corporation and the Maharashtra Infrastructure Corporation into a new financial structure. The goal is bold: to unlock future revenues today and use them to fund new infrastructure such as roads and bridges.


In theory, the move makes sense. The state is adopting a model successfully used elsewhere. Infrastructure Investment Trusts, pioneered in the United States in 1960, offer a way to securitise infrastructure income and attract both private and public investors. India’s National Highways Authority (NHAI) embraced the idea in 2020, raising funds through its own National Highway InvIT. Maharashtra’s version mirrors that template.


It is meant to act as a bridge between the state’s infrastructure ambitions and its capital constraints. The state is no stranger to fiscal pressure, and the MahaInvIT could serve as a clever workaround: instead of burdening the exchequer with more borrowing, it turns predictable revenue streams from existing public assets into an investable product.


However, for all its innovation, the trust’s success will depend less on structure and more on execution. India has long suffered from the malaise of announcement-heavy, delivery-light governance. Grand plans stumble over bureaucratic inertia, delayed clearances and capacity constraints. Consider the NHAI InvIT itself. While it did manage to raise over Rs. 5,000 crore initially, questions persist about project quality, investor appetite and the time taken to bring assets on stream. Similar bottlenecks await MahaInvIT if the state does not ensure efficient execution and transparent governance.


InvITs are not magic wands. They require steady, reliable income from underlying assets, not something every public infrastructure project in India can guarantee. Revenue models for many roads and bridges depend on toll collections or annuity payments which can be susceptible to political interference or poor compliance. If investor returns fall short of expectations, confidence in the model could erode quickly.


Then there is the question of accountability. What happens if the trust fails to attract sufficient investment? Or if the projects it funds underperform? The governance framework must not only comply with SEBI norms but also go beyond them, ensuring transparency, performance benchmarks and independent audits. Maharashtra’s record on this front is mixed.


Still, the state deserves credit for stepping ahead of the curve. As India embarks on its next wave of urbanisation and infrastructure expansion, states will need to think creatively about financing. That, ultimately, is the question. Ambition is not in short supply. But will there be ground results? Without swift project clearances, robust governance and investor confidence, the trust merely remains a gesture of financial engineering rather than a catalyst for bulldozers and backhoes.


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