Diwali 2025: Shining Spotlight on Economy and Businesses

As diyas and candles flicker to life and markets buzz with festive cheer, the Diwali season every year is also the time that means more than just a cultural celebration. For many, it is also a moment to understand whether India’s economic bullet is hitting the bull's eye, understanding or testing its strength of consumption, the reach of credit, and the fine balance between optimism and broader economic caution.

While the economic trajectory for FY26 and beyond will hinge on global tariff fluctuations and how effectively domestic policy tools and fiscal buffers are deployed, the festive season serves as a perfect lens to understand consumer behaviour as people decide where and how to spend after months of planning and cautious buying. 

For the uninitiated, private consumption, which has historically powered India’s growth engine, saw an estimated 7.2 per cent growth in FY25 from 5.6 per cent in FY24, indicating households returning to spending mode gradually after a period of restrained demand. 

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As inflation softens with headline inflation in September falling to an eight-year low of 1.54 per cent, it should support urban consumption ahead, which is yet to provide any signs of a decisive lift in contrast to rural consumption. Recent measures such as income tax cuts announced in the budget and revised slabs for Goods and Services Tax (GST) should also propel consumption. 

GST collections -- an indicator of the economic health and consumption levels -- in September stood at Rs 1.89 lakh crore, a 9.1 per cent increase year-on-year. After accounting for refunds, the net GST revenue was Rs 1.60 lakh crore, a 5 per cent year-on-year increase. The growth was partly driven by the implementation of the new simplified tax structure.

But the question is whether festive buying gives tailwinds to the momentum? One signal to it is e-commerce orders. According to RedSeer, e-commerce sales during the 30-35 days leading up to Diwali are projected to cross Rs 1.15 lakh crore GMV, growing 20-25 per cent year-on-year - nearly double last year's pace, and probably the best in the last 5 years.

Amazon has reported an encouraging pickup in site traffic, particularly from non-metro regions and goods in discretionary segments such as electronics, décor, and gifting are expected to benefit from pent-up demand and ongoing discounting.

Given these dynamics, much also depends on the credit landscape as to how financing can support the push, as festive buying is often turbo-charged by easy availability of loans and other lending products by banks, such as zero-interest EMIs, buy now-pay later, credit on UPI, etc.

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While bank credit growth in the September quarter was seen at a modest around 10 per cent, it is expected to pick up pace in the December quarter on the back of festive demand and GST rate cuts.

“In the second half of this fiscal, credit growth is expected to pick up as the composite effect of government and regulatory stimuli plays out,” according to Crisil.

The festive performance also assumes significance amid an expected weak second quarter of the current fiscal for banks as drop in lending rates outpaces the drop in funding costs along with margin pressure and profit growth on the back of the repo rate cuts earlier by the Reserve Bank of India.

The NBFCs are also expected to ride the seasonal credit surge with MSME festive loan demand expected to grow 35–40 per cent to Rs 3.45 lakh crore while auto loans are likely to grow 18–19 per cent this quarter. Overall credit growth is projected at 13–15 per cent in FY26.

By leveraging the consumption surge during the Diwali season, lenders are looking to improve their business and strengthen customer acquisition.

Yet, not all festive spending is on an even keel. The abnormal run-up in gold prices may erode demand volumes and even if consumers continue to buy gold as an investment, the elevated entry point may constrain discretionary jewellery purchases.

As per the World Gold Council (WGC), India's gold jewellery demand dropped by 17 per cent year-on-year in the second quarter of 2025, marking the lowest quarterly volume since Q3 2020 due to elevated gold prices which reached record highs of Rs 1,30,675 on October 17.

However, sensing that the prices may not cool down and go further up, the consumers may come back with the fear of missing out and revive the overall sentiment around buying jewellery at elevated prices.

Also read: India Reaches 50:50 Split Between Cash and Digital Payments in Private Consumption

According to estimates by the traders’ body, Confederation of All India Traders (CAIT), total gold and silver trade on Dhanteras is expected to exceed Rs 50,000 crore nationwide, while overall Diwali festive trade this year is likely to surpass Rs 5 lakh crore.

Coming to markets, strong liquidity and investor optimism are fuelling record capital market issuances, reflecting India’s deepening equity markets. There were 34 IPOs and 25 QIPs, together raising $11.2 billion – the highest quarterly fundraising of 2025 during the September quarter.

While the markets have staged a robust rally ahead of the festive season, supported by foreign fund inflows, easing crude prices, and encouraging global signals, analysts caution that bouts of profit-taking and significant short positions may keep volatility elevated in the near term.

Overall, the mood is seen to be cautiously hopeful this season. For companies and investors, the festival must be a moment of smart execution with calibrated discounts, disciplined credit offers, and real-time demand tracking, not a moment of blind optimism. This gains significance for a number of enterprises across sectors within India Inc., facing demand and margin pressures for quite some time now.

Then there are broader concerns that continue to linger, for instance, the rising household debt, decline in household savings rate, growth in credit card loans, even as “India’s macroeconomic fundamentals remain strong despite global turbulence,” said RBI Governor Sanjay Malhotra earlier this week at the IMF and World Bank Group’s annual meetings in Washington, DC.