Consumer spending may remain subdued this Diwali as companies across sectors plan to slash their corporate gifting budgets by up to 20 per cent amid uncertain recovery in growth and a deficient monsoon leading to increased prices of essential commodities.

“Depreciating rupee, weak consumer demand showing up in sluggish sales, muted wage growth and impact of turbulence in global markets are certain key factors forcing corporates to slash their Diwali gift budgets significantly,” highlighted a survey conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) through its Social Development Foundation.

Cost of living and prices of food items have grown faster than earnings which is compelling people to refrain from overspending during the festive season.

Last year, with a new government boosting optimism and consumer confidence, a perceptive improvement in business sentiment had encouraged companies to increase their festive gifting budgets by 10-15% at Diwali-2014. But this time around there is a bleak business outlook for trade and industry as the government struggles to rev up economic growth and labour market, said D.S. Rawat, Secretary- General of Assocham.

“Even consumers are likely to tighten their purse strings due to rise in prices of essential food items like pulses, edible oil and others due to poor monsoon rains, thereby curtailing discretionary expenses and spending on items entailing higher ticket value,” he added.

During the last three weeks of survey, Assocham interacted with about 1,000 working people and 500 companies’ representatives from diverse sectors like automobile, biotechnology, BFSI (banking, financial services and insurance), energy, fast moving consumer goods (FMCG), information technology (IT), pharmaceutical, real estate and others across 10 cities, that is, Ahmedabad, Bangalore, Chennai, Delhi-NCR, Hyderabad, Indore, Kolkata, Lucknow, Mumbai and Pune, to ascertain the individuals’ and companies’ festive plans.

A majority of people (about 60 per cent) said they have shelved plans for expenditure on big ticket items be it automobiles, consumer durables and other non-essentials fearing their companies might cut bonus as they have witnessed a lull in most of this year. They would rather save money for emergencies instead of spending lavishly on festival shopping amid skyrocketing prices of essential commodities and food inflation.

Others said they are making a budget for festival spending and will look out for deals to try and take advantage of sales both online and offline.

Besides, over half of the 500 companies’ representatives that Assocham interacted with said they plan to cut their festive budgets by at least about 20 per cent as compared to last year. Others said they plan to reward only performing employees and premium clients this Diwali.

Decline in profits owing to a lull season, poor monsoon, global slowdown, sluggish domestic investment scenario, high prices, interest rates, weak consumer sentiment, rupee devaluation and others are key reasons highlighted by the companies for cutting their corporate gift budgets.

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