The festive season has started at a time when recessionary trends have gripped key sectors of the economy. People are not spending enough. The government couldn’t ignore these signs, not anymore. One of the many significant measures taken by the government to alleviate market sentiments was to announce a cut in the corporate tax that will help the top 1,000 firms save a whopping Rs 37,000 crore.

Despite this, there are enough indications that the rich are spending less. The automobile sector has taken a hit, so has the real estate sector, which is having its worst year in a decade. The story is not very different in the luxury retail sector; even art auctions in the first half of 2019 have shown an unprecedented downward slide.

If the rich are spending less, the poor have fairly limited funds at their disposal, and the middle class has generally become tight-fisted as there have been job losses across various sectors. There’s a general cash crunch – or in economic parlance, a liquidity crunch – as far as buyers are concerned and that has adversely affected the market sentiment, which is not positive, to put it mildly.

Markets and malls

The festive season is when the retail industry expects things to change. People buy new clothes, cars, property, utensils during Navratri – the auspicious nine days – and around Diwali, which falls on October 27 this year. The government as well as businesses, big and small, want festivity to fuel consumer demand and beat the recessionary spiral that has been gaining momentum in the last few months.

As of now, the smaller retailers are not happy. Markets like Karol Bagh and Lajpat Nagar are not doing brisk business even during Navratri – but it’s still early days. It looks like market sentiment will be slow to pick up, if it does at all. Shopkeepers talk evocatively of their distress, poor footfall of customers, their reluctance to spend, whether they are in Karol Bagh or in Lajpat Nagar or Mall of India in Noida. There is growing dismay as sales have not taken a quantum jump with the start of the auspicious festival season.

Traders’ association representatives are vocal, like Pawan Kumar Gaba, a member of the Delhi Traders Association. A respected figure in his late sixties, he was the owner of a factory which was sealed many years ago; his sons are in the retail business, with shops in various markets. “The situation is going from bad to worse. Corruption is rampant and people are scared to spend their money,” he says, adding, “Purchasing power is limited, there’s not enough money in the market. People are buying only what is necessary for the purpose of festivals.”

Jewellery and apparel showrooms have few visitors, whether in a mall or market. Shops of big brands like Woodland are offering up to 40% discount on select items. At Levis Strauss, the complaint is that most of the business has gone online.

Underneath Noida’s Sector 18 Metro Station are many electronic sales and repair shops for mobile and other electronic devices. Amit Kumar, 27 years, a local, works in one of these shops that sell and repair iPhones. “There was a time, before demonetisation, 12-15 iPhones were sold every day. Now on an average two iPhones get sold,” he gives the numbers.

Speaking evocatively in Hindi, he says many of his co-workers have lost their jobs. On the first day of Navratri, six iPhones were sold, but it was an aberration, there’s no respite from poor sales. “People are not protesting,” he explains, “because many of the shop owners, like his own boss, is a big supporter of Modi.”

Amitabh Kant, the CEO of NITI Aayog and the most vocal spokesperson of the government, is unfazed in the face of what many economists have described as a “brewing economic crisis”. Kant explains that the government, along with the Reserve Bank of India, has taken some historic steps like reducing corporate tax and the repo rates – the rate at which the RBI lends money to banks – to boost the economy.

“India has one of the best tax regimes, comparable even to the East Asian countries. By taking this slew of economic measures, what the government has done is to place a lot of liquidity in the bottom line of the companies,” he says. He minces no words when he says now the onus is on the corporate sector to “pass some benefits to the customer and augment the demand.”

Looking at the economic parameters presents a different picture. There’s no paucity of money at hand. A joint secretary-level officer in the ministry of finance explains, “There’s no dearth of liquidity in the economy. It’s in fact in surplus. Everyday Rs 1.5 lakh crore of cash is deposited by various banks with the RBI. The real matter of concern is liquidity absorption,” he says. Or in simpler words, people aren’t spending much and banks are reluctant to lend.

However, lending will pick up in the festive season as banks are now offering easy loans as part of special packages for the real estate, automobiles and consumer durables. “There will be special packages from October 3 to 7 and then again before Diwali,” informs the joint secretary.

Real festivity is online

“The money in circulation at the time of demonetisation of was Rs 16 lakh crore, now it is Rs 21 lakh crore,” says VK Bansal, National General Secretary of the Federation of All India Vyapar Mandal. A chartered accountant and a lawyer, Bansal blames the government for making “cash a villain”.

He points out that the reasons for reluctance to spend is not just economic, but emotional as well. “The consumers are uncertain about the future. Job loss is a reason why they are holding cash to build reserves. They feel banking is collapsing as banks are unwilling to lend.”

Also, Bansal points to the fact that measures taken for economic revival boosters will benefit big corporate houses, are not for small and medium enterprises. He explains in detail that the informal retail sector, small traders and shopkeepers, not only keep the money in circulation, they also are a source of employment to millions in the informal and unorganised sector. The job loss in the informal sector is alarming, which mostly doesn’t get reflected in account ledgers or balance sheets.

Every evening after sundown, in front of the Sector 18 Metro station in Noida, along the road paved with granite stone, sits a large contingent of unemployed youth on the steps, pontificating about their future and looking desperately for odd jobs. “Many of us worked in the Sector 18 market. This used to be the busiest time of the year. Now we are languishing without a job,” says Rajesh Kumar, 33, from Samastipur in Bihar. He is an ace electrician and worked for 10 years at a local firm assembling computers and laptops.

Bansal is a worried man, for the situation is only going to get worse. “Most of the consumers are not coming out in the market, they prefer to buy online. The online sales are doing very well – offering heavy discounts – while the shops bear a deserted look. If this continues, there will be a greater job loss, resentment and erosion of demand,” warns Bansal.

The real festivity is being experienced online, not in the physical world. Lucrative offers are being mailed by high-end designers directly to customers. For instance, designers Ankur Modi-Priyanka Modi have sent out by email a catalogue of their latest designs of ethnic Indian women wear with a message, “Karva Chauth is around the corner and we have done the homework for you by bringing all the fiery outfits right here just a click away!”

The Amazon Great Indian Festival, like other leading online players, is doing a great job to encourage people to buy online. Patriot sent queries to Senior Vice President and Country Head of Amazon India, Amit Agrawal. A detailed response was received from Amazon India’s spokesperson. “We have seen a record participation from digital Bharat in the first 36 hours of our Great Indian Festival…in key categories – premium smartphone brands OnePlus, Samsung and Apple made record sales worth about Rs 750 crore in 36 hours and large appliances and TVs showed a growth of nearly 10x (ten times) over an average business day.”

Because they deal in bulk, they have extracted heavy discounts from manufacturers and organised easy finance by tying up with banks. “Over five lakh sellers will collectively offer over 200 million products and leverage the Amazon ecosystem to provide an unparalleled shopping experience, making Amazon.in the country’s one-stop shop. Customers love the great value on the largest selection of products, delivered to their doorstep fast and reliably,” says the Amazon India spokesperson.

Needless to add, in this festive environment happiness is often equated with the ability to buy. “Like every year, we are bullish about the festive season and look forward to bringing the biggest festival to our Indian customers with great deals, discounts, selection across categories, new launches and more.”

So, is this sale bigger than those in the past? “We expect this season to be our biggest ever in terms of traffic, new customers, digital payment adoption and sales,” they say, adding, “With the theme ‘Now budget won’t hold back India’s celebration’, we are providing an array of finance options from No Cost EMI on debit and credit cards and Bajaj FinServ, 10% instant bank discount on SBI cards, exchange offers and lots more to our customers, focussing on affordability and customer convenience.”

The big question is: will online retail be able to check the recessionary spiral? Amazon India is non-committal on this count. “It’s still very early days for online commerce and even organised retail in India. What’s important for us is to remain focused on how can we introduce more Indian customers to the benefits of shopping online, how can we help with discovery and access, how can we continue to raise the bar for customer experience with our pillars of selection, pricing and convenience. We believe customers have a divine discontent and they will only continue to visit a marketplace that can be attentive to their needs,” says the spokesperson.

And as far as the recent trends are concerned, online is fast emerging as a marketplace attentive to customers’ needs. And even in this lackadaisical economic scenario, showing incredible gains. But people like Bansal, trader unions, small retailers, are worried. For they are staring at dwindling market share, job loss and hardships. There are not many takers when Amitabh Kant says, “It will be a prosperous and green Diwali this year.”