Good cheer and some festive spirit were needed to loosen purse strings. Passenger car sales of the top nine auto companies have shot up nearly 90%, crossing 3 lakh units this September, compared to sales figures a year ago. Market leader Maruti Suzuki more than doubled September sales to 1,48,380. Two-wheelers, India’s affordable mass transporter, sold well too, with both TVS and Suzuki Motorcycle reporting 16% and 30% growth over September last year. The availability of semi-conductor chips and a host of new models boosted production, but robust festival demand was the main driver. Another bell weather indicator, fast-moving consumer goods (FMCGs) like packaged foods and toiletries, began showing healthy growth from August onwards after falling sales in the last few quarters. Bizom, a retail intelligence platform, reported a sequential growth of 6.7% in rural areas, while urban markets grew 5.5% in August.
The data indicates that people are keen to put Covid behind them and return to normal consumption patterns. This is good news. The depth of the rebound is also apparent from the jump in petrol and diesel sales in September. Petrol sales soared over 13% to 2.65 million tonnes in September compared to the year-ago figure, while the most widely used fuel, diesel, shot up nearly 23% in September. This indicates a real pick-up in economic activity. The jump in jet fuel (ATF) demand by over 40% and the air passenger traffic inching close to pre-Covid levels show increasing business and family holiday activity.
Home sales, another indicator of consumer behaviour, has not shown the expected festival spike. The Reserve Bank’s (RBI) periodic hike in interest rates—now around 140 basis points higher since April—has made home loans expensive. Simultaneously, builders have hiked prices with the steady surge in commodity costs. Property broker firm Anarock expects annual home sales to hover around last year’s level of 91,000 units. There is some irony here.
RBI’s persistence in pushing up interest rates is aimed at cooling demand to bring down prices and inflation. However, market factors—disruption in supply chains and high food prices due to the Ukraine war—have kept retail inflation hovering around 7%.
The RBI’s measures have only increased the consumer’s burden by making borrowing costlier. If proactive measures are not taken to halt the march of prices, the festival boom may be a flash in the pan.