Economics of Diwali

As we celebrate the sparkle of Diwali festivities with lights, the Indian economy, too, is glowing with festive energy. Diwali is not only a cultural and spiritual event but also an economic phenomenon that mobilizes consumption, trade, and emotion on a scale unmatched by any other festival in India. It is a festival where faith, finance, and family come together to illuminate not just homes but entire markets.

Diwali blends culture and commerce. Traditionally marking the return of Lord Ram to Ayodhya after 14 years of vanavasa (exile), the festival has evolved into India’s largest consumption cycle. According to industry estimates, Diwali season alone accounts for 30–40% of annual sales in sectors like jewellery, automobiles, electronics, apparel, and consumer goods.

In 2024, India’s festive spending during Diwali week was estimated at INR 3.2 lakh crore, reflecting a 17% rise over 2023, driven by rising disposable incomes, pent-up post-pandemic demand, and digital retail penetration. Retail chains, e-commerce platforms, and even microenterprises depend on this period to recover annual profits. For small traders, Diwali is often the difference between a good year and a bad one. The festival also synchronizes the Indian economy’s emotional rhythm—consumer sentiment peaks as the festival approaches, heightened by work bonuses, gifts, and an almost cultural belief that new purchases bring prosperity.

Two days before Diwali, Indians celebrate Dhanteras, considered the most auspicious day to buy gold, silver, or anything of value. Historically, this practice was rooted in agrarian prosperity cycles during which, farmers who had completed the harvest season invested their earnings in tangible assets like metals. Today, the sentiment remains, but the scale has exploded. The symbolism has migrated from the vault to the marketplace, aligning tradition with modern consumption.

Diwali’s economic landscape has been radically redrawn by digital commerce. In 2024, online festive sales crossed INR 90,000 crore, driven by e-commerce platforms like Amazon, Flipkart, and Meesho. Tier-II and Tier-III cities accounted for more than 60% of new shoppers, an indication that India’s digital inclusion is now deeply linked with its festive economy.

Algorithms have replaced astrologers in predicting purchasing patterns. AI-driven recommendations, influencer marketing, and digital payment ecosystems like UPI have made the act of buying faster and impulsive. While urban consumers enjoy massive discounts, small offline retailers struggle to match online prices. Many traditional businesses like sweet shops, garment stores, and gift outlets are now adapting with hybrid models, selling on WhatsApp or through community platforms. The local bazaar is not dying; it is simply going online.

Behind the glitter of malls and advertisements lies a quieter but equally powerful story of the informal and rural economy that powers Diwali. Across India, millions of artisans, potters, weavers, and small manufacturers depend on the season for a significant portion of their income. From handmade diyas in Bihar to terracotta idols from Bankura, paper lanterns in Maharashtra, and bamboo crafts from Northeastern states, Diwali sustains local creative economies that embody both tradition and entrepreneurship. In recent years, several NGOs and social enterprises have helped rural producers connect directly with urban buyers through digital platforms. For instance, self-help groups (SHGs) supported by government programs like NRLM (National Rural Livelihoods Mission) and private CSR initiatives now sell festive handicrafts on e-commerce sites and social media. The “Make in Village” movement during Diwali is becoming a quiet counter-narrative to imported mass-produced goods. Every diya sold is not just a source of light but a livelihood.

Gifting is central to Diwali’s economic ecosystem. From corporate gift hampers to sweets exchanged among families, the ritual symbolizes goodwill, reciprocity, and status. In 2024, India’s corporate gifting industry was valued at ₹12,000 crore, with strong growth projected for 2025. Beyond sweets and dry fruits, companies now gift experiences like wellness vouchers, eco-friendly hampers, and handmade products to reflect social consciousness and sustainability. The gifting economy also reveals deeper social psychology. Gifts during Diwali are not just commodities; they are currencies of relationship. In economic terms, they create “social capital”, the trust and goodwill that sustain business and personal networks alike.

In last decade or so, Diwali’s environmental impact has come under scrutiny. Delhi is the best (or worst) example of this intense air pollution from firecrackers making the environment unbreathable, plastic waste from packaging, and excessive electricity consumption have led to rising calls for a Green Diwali. The market is responding with conscious choices. In 2025, the sale of eco-friendly crackers and biodegradable decorations is expected to grow by 30%. Solar-powered lighting, organic sweets, and recycled packaging are becoming mainstream. Conscious consumers, especially younger urban Indians, are now demanding sustainable alternatives that align celebration with responsibility. The shift from conspicuous consumption to conscious consumption marks a new chapter in the economics of Diwali, one where prosperity is measured not just by spending, but by sustainability.

However, Diwali’s prosperity is not evenly distributed. Inflation affects the purchasing power of lower-income families who often face higher food and fuel prices during the season despite the recent GST reforms, which has significantly brought down the prices of most of the consumer goods. While the urban affluent splurge on gadgets and gold, many households cut back on essentials.

This divergence reflects the broader K-shaped recovery post-pandemic of the Indian economy, where upper segments surge ahead while those on the lower segments struggle. The festive glow, though radiant, hides shadows of inequality. For small retailers, rising input costs and competition from online giants have squeezed margins. For daily wage earners, the festival may mean temporary income spikes but little long-term security. Diwali illuminates both the promise and paradox of India’s growth story.

At its core, Diwali celebrates renewal of hope, homes, and human spirit. Economically too, it acts as a reset button for the nation’s consumer sentiment. The act of cleaning homes, buying new things, and lighting lamps mirrors the cyclical nature of economic optimism. For policymakers and economists, the festive season is a real-time barometer of demand. For families, it’s a reminder that prosperity is not just about wealth, but about togetherness and gratitude. In many ways, Diwali teaches an enduring lesson in economics that growth is sustainable only when it is inclusive, joyful, and mindful.

The economics of Diwali is not just about expenditure, but it is also about the exchange of energy, emotion, and enterprise. It reflects India’s evolving story of modernization rooted in tradition, digital transformation anchored in ritual, and capitalism softened by culture. The future of India’s festive economy will shine brightest when it balances profit with purpose, growth with gratitude, and consumption with conscience.

Happy and Prosperous Diwali to you and your loved ones!