India braces for first Diwali after Gulf war with tighter budgets

Indian households gear up for Diwali festivities, but with a tighter budget as rising food prices, costlier consumer electronics and soaring airfares make celebrations and big-ticket purchases more expensive. With household spending divided across essentials and discretionary purchases, shoppers now have to choose between spending more for the same basket of goods and services or scaling back their plans.

The pressure is beginning to show in festive sales, with e-commerce platforms reporting slower demand than last year during the opening days of their annual shopping events. Higher product prices and lower discounts are weighing on purchases, while rising costs of food, sweets and travel are adding to the burden just as households prepare for the festival season.

Also read: Festive cheer is high, but shoppers are counting every rupee


India's retail inflation quickened to 5.54% in September, nearing a two-year high, while retail food inflation surged to 7.74% amid a sharp rise in the prices of vegetables and staples, including edible oils, sugar, onions, ginger and garlic. The rise in essential expenses leaves households with less room for discretionary spending, impacting demand during one of the year's biggest consumption periods.

The impact is already visible in online shopping data. According to an ET report, e-commerce platforms recorded gross merchandise value (GMV) of Rs 29,800-30,900 crore during the first four days of Amazon's Great Indian Festival and Flipkart's Big Billion Days, compared with Rs 33,200 crore in the year-ago period, according to Datum Intelligence.

Delivery dispatches during the first 10 days of the sales events were 10-12% below the year-ago period, executives at direct-to-consumer brands, e-commerce platforms and logistics companies told ET.

Prices of smartphones, home appliances and laptops have risen 30-40% in recent months, partly because of component shortages as resources are diverted to meet demand from the artificial intelligence industry. According to Counterpoint Research, smartphone unit sales declined 16% year-on-year during the early part of the 2026 festive e-commerce sales period.

Discounts have offered less relief this year. Average discounts during festive sales are 35-40% lower than last year, according to brand founders and executives cited by ET, reducing the incentive for shoppers to make purchases.

However, the slowdown is not uniform across categories. Amazon said its platform recorded more than 440 million visits during the opening phase of the Great Indian Festival, its highest ever, with over 72% of visits coming from beyond the top nine metros. The company also reported strong initial sales, even as some brands said demand tapered off as the events progressed.

Also read: Festive shopping gets costlier as brands plan to hike AC, TV and appliance prices from October 1

Sugar, sweets add to the cost of celebrations

The squeeze extends beyond big-ticket purchases to the sweets, confectionery and desserts that are central to Diwali celebrations and gifting. Higher sugar prices and the cost of other key ingredients are pushing up expenses for manufacturers, with consumers likely to face elevated prices as festive demand gathers pace.

Inflation in sugar, confectionery and desserts accelerated to 13.8% year-on-year in September from 10.9% in August and 3.4% in January, according to data from the Ministry of Statistics and Programme Implementation. Sugar prices rose 29.8% year-on-year in September, compared with 24.3% in August.

Inflation in prepared sweets, excluding milk-based products, candy prices, ready-made food and namkeen also increased.

The rise comes as restaurants and food businesses grapple with higher ingredient costs, utilities, manpower expenses and compliance-related spending. Select restaurant chains have raised prices, reduced portions or paused higher-priced menu items to manage the pressure.

For households, more expensive sweets and prepared foods add to the cumulative cost of celebrations, alongside groceries, gifts and purchases for the home. Even modest hikes across several spending categories can force families to reprioritise their festive shopping.

Also read: 'Govt has no plans to regulate airfares'

Going home for Diwali gets costlier

Travel is another pressure point for household budgets, particularly for people planning to return to their hometowns for the festival. Airfares on several major domestic routes have risen sharply, making family visits more expensive at a time when food and other household expenses are also increasing.

Airfares for the festive and year-end holiday season are 68% higher than a year ago because of higher fuel costs and fewer flight options, according to aviation analytics firm OAG. Data reviewed by ET showed that average one-way fares for travel between September 1 and November 10 rose 68% on the Delhi-Hyderabad route, 51% on Mumbai-Kolkata, 39% on Delhi-Goa and 37% on Mumbai-Bengaluru.

The rise comes amid pressure on aviation turbine fuel prices linked to the West Asia crisis. IndiGo, Air India and Akasa Air have raised fuel surcharges recently, adding to the cost of air travel.

Amid rising pressure on wallets, the government is not planning to regulate ticket pricing by airlines under the new air fare rules being framed, a senior government official told ET, adding that the new laws will allow the government to fix limits on airfares during periods of extraordinary situations like a natural calamity.

For families weighing the cost of travelling home against other festive expenses, higher fares could mean fewer trips, shorter stays or a shift to alternative modes of transport.

The broader concern for retailers and consumer-facing businesses is whether the pressure on household budgets will persist through Diwali. While the extended festive calendar could provide more opportunities for purchases, elevated prices and weaker discounting are making shoppers more cautious.