Diwali 2025 blockbuster – A festive tale for India Inc and shoppers directed by tax magic - The Economic Times

This Diwali turned out to be a blockbuster for retailers, with rate cuts under the Goods and Services Tax (GST) giving consumption a noticeable push and encouraging middle-class families to fill their shopping bags with a wider range of products. Shoppers spent freely across categories — from lab-grown diamonds and casual wear to home furnishings — bringing both mass and premium markets to life.

Raymond reported a revival in mid-market demand, particularly in the ₹1,000–₹2,500 range, after a quiet September. Ikea India also witnessed strong traction across price segments as customers looked for both design and affordability, The Times of India reported.

Last year, high inflation combined with stagnant wages and a sluggish job market had forced many lower-income households to hold back on discretionary spending, weighing down overall demand. This year, the story looks very different.

According to Crisil Ratings, an assessment of 40 organised apparel retailers — who together contribute about one-third of the sector’s revenue — shows that the latest GST rationalisation could add around 200 basis points to industry growth this financial year. That would keep the organised apparel retail sector steady at 13–14% growth for a second consecutive year.

Finance Minister Nirmala Sitharaman had said consumption picked up after GST rates were cut on September 22 and said she expected this momentum to carry forward beyond the festive period. “GST rate reduction has resulted in an increase of purchases. The consumption drive will continue… We are convinced that on every such item, benefits are being passed on by companies,” she said on Saturday during a press conference on the government’s ‘GST Bachat Utsav’, where she was joined by Commerce and Industry Minister Piyush Goyal and Electronics and IT Minister Ashwini Vaishnaw.

Apart from GST cuts, the government has offered income tax relief this year to encourage spending, while easing interest rates and falling inflation have also lifted purchasing power.

Retailers across sectors — from garments to gadgets — reported brisk sales as consumers completed their last-minute festive shopping on Sunday. Firms selling everything from smartphones and household appliances to cars and clothes estimated sales between Navratri and Diwali to be as much as 50% higher than the same period last year, The Economic Times reported.

For automobile and electronics makers, this season has brought their fastest growth in more than ten years. Industry executives attributed this surge to the tax cuts that took effect on 22 September — the first day of Navratri — along with income-tax reductions that left the middle class with more disposable income. Discounts and special offers from manufacturers added to the buying frenzy.

Maruti Suzuki, India’s largest carmaker, delivered about 325,000 vehicles between 22 September and 18 October (Dhanteras), marking a 50% jump over last year’s festive period. The company logged 450,000 bookings during the month, including 94,000 for small cars alone.

“The recent GST rationalisation has created positive consumer sentiment. While its primary impact was felt in categories such as electronics and automobiles, the lower tax burden has also impacted some part of our range and contributed to greater purchase consideration in home furnishings, enabling us to pass on the benefit to our customers,” said Ankit Ghai, country selling manager at Ikea India, in comments to TOI.

Ikea said select items in its portfolio were covered under the revised rates, including eco-friendly furniture made entirely from bamboo, cane, or rattan, whose tax rate has been reduced from 12% to 5%.

The updated GST framework, which came into force on 22 September, made several goods cheaper — including basic household items, budget apparel, footwear, air conditioners, dishwashers, and small cars. With extra savings in hand, shoppers also chose to upgrade to premium categories, even in segments unaffected by the tax cuts.

At women’s wear brand Biba, sales rose by double digits compared with last year. Managing Director Siddharth Bindra attributed the improvement to the company’s design innovations and said its new ‘Red’ collection had been “falling short of stocks.”

Pooja Sheth Madhavan, founder and managing director of Limelight Lab Grown Diamonds, described this year as one of the “strongest” festive seasons for the brand, reporting a 40% increase in sales over the previous Diwali. “Consumers gravitated towards solitaire-based everyday luxury pieces, rings, pendants and earrings that blend occasion wear with daily elegance,” she said. She added that the premium segment priced between ₹75,000 and ₹2 lakh performed “exceptionally well.”

Raymond’s chief business officer, Neeraj Nagpal, said casual wear had sold strongly this season and added that demand for formal and festive wear was likely to climb further as the wedding season begins after Diwali.

E-commerce major Amazon India said it registered record numbers this year during its annual festive sale, attracting 276 crore customer visits. The platform reported a 30% year-on-year rise in sales of premium smartphones priced above ₹30,000, as well as strong upgrades to larger television sets. According to data from SaaS platform Unicommerce, online order volumes grew 24% year-on-year and gross merchandise value increased 23%.

The economic backdrop has also turned more favourable for consumers. In October 2024, when Diwali fell on the 31st, retail inflation had surged to a 14-month high of 6.2%. Since then, it has cooled significantly, with September’s figures showing an over eight-year low of 1.5%.

However, some price pressures persist. Global supply volatility and shortages in key commodities have led to localised spikes — cocoa, for instance, saw steep price rises earlier this year — though broader inflationary concerns appear contained for now.

With tax cuts, reduced borrowing costs and easing inflation aligning just ahead of the festival season, India’s retail economy appears to have entered a sweet spot. Whether this buoyancy lasts beyond the sparkle of Diwali remains to be seen, but for now, the country’s retailers are celebrating a festival season they will not forget.