Belt-tightening dims festivals

Mumbai: India's retailers look set for a tough annual religious festival season — traditionally a time for exuberant spending — as high inflation and interest rates force consumers to tighten their belts.

The season, which began with the end of Ramadan and ends with the Hindu festival of lights, Diwali, in late October, is seen as a lucky time for big purchases from cars and property to gold.

But analysts warn that expenditures could be curtailed this year as the country's economy slows under the brunt of nearly a dozen interest rate hikes in 18 months, aimed at taming nine per cent-plus inflation.

"High-value purchases and where borrowed money is involved could slow down," Siddhartha Sanyal, chief India economist with Barclays Capital, said.

Hemen Kapadia, a Mumbai-based stockbroker, has his heart set on buying the latest Ford Fiesta, which costs nearly Rs1 million (Dh79,140) for a diesel version.

But he said he has postponed the purchase because of India's weakening economic situation, which has sent the Bombay Stock Exchange's benchmark share index down by more than 20 per cent and hit his earnings.

Car sales slump

India posted its slowest economic growth in six quarters last week, with output up 7.7 per cent year-on-year, as expansion was hit by the longest stretch of monetary tightening in a decade.

"I won't buy the car for another year. It's too costly," Kapadia said.

Indian car sales are viewed as a barometer of the national's overall economic health.

Car sales slumped 16 per cent year-on-year to 133,747 units in July — their biggest drop in nearly three years — as high interest rates and rising fuel prices kept buyers out of showrooms.

"The next wave of buying will come only when incomes rise or consumers find a good deal," said auto analyst Mahantesh Sabarad of Fortune Equity Brokers in Mumbai.