Beyond Tradition: Diwali as India's Growth Catalyst

As Indians across the nation prepared to celebrate the festival of lights with diyas, sweets, and new purchases, they unknowingly participated in what was the biggest boom in India’s retail sector. Beyond its religious and cultural significance, Diwali acts as a catalyst for staggering economic growth. Due to the consumer-driven nature of the Indian economy, Diwali is a crucial time of the year for many industries. This year, the festive season shattered sales records, with Diwali trade reaching an unprecedented Rs 5.40 lakh crores in goods and Rs 65,000 crores in services, a 25% surge from last year. Such extraordinary figures are a testament to the importance that Diwali holds for India’s economy. 

The increase in consumer spending from last year has come about through meticulous government planning and favorable economic policies. The announcement of the long-awaited GST reforms, near the festive season, gave the economy the much-needed impetus to stimulate spending.

The festival of lights ignites remarkable performances across the economic landscape of India. From automobiles to gold, from digital platforms to traditional retail, the festive season illuminated the Indian consumer rallying behind PM Modi’s ‘Vocal for Local’ call; India’s manufacturing sector has received a huge boost. Although the dependence on China remains persistent in some product lines, the Indian consumer has reinforced the idea of ‘Aatmanirbhar Bharat’ by directing their purchasing power towards the Indian manufacturers.

The Policy Architecture: GST 2.0, Monetary Policy, and Credit as Growth Levers

The success of the retail sector and the ₹5.40 lakh crore Diwali consumption surge isn’t merely a coincidence but rather a result of a well-orchestrated set of policy measures by the government designed to maximize the purchasing power of the common man. 

Next-Gen GST reforms were introduced, which led to a reduction in tax slabs and, consequently, a decrease in prices of essential goods. These reforms are a strategic repositioning from the government, instilling the belief that the economy can be sustained through consumption-led growth.

Fundamentally, GST 2.0 operates as a consumption stimulus, aimed at infusing liquidity into the economy by increasing household savings. India’s national GST council introduced a dual tax framework; this two-slab system (5% and 18%) replaces the earlier four-bracket structure (5%, 12%, 18%, and 28%), streamlining compliance and lowering tax rates on many goods that previously fell under the 12% and 28% categories, leading to a dramatic cut in prices of consumer goods: hair oil, shampoo, toothpaste, and toilet soaps dropped from 18% to 5% GST. Butter, ghee, cheese, and packaged foods moved from 12% to 5%. Electronics, automobiles, and consumer durables saw significant rate reductions, with some items shifting from 28% to 18%. The increase in consumption has validated the government’s claim that the reforms are being introduced with the general populace in mind. Nirmala Sitharaman, the finance minister, estimated that changes to the GST would add ₹20 lakh crore to the economy in FY 2025-26.

Early data support this ambitious goal, with GST collections hitting ₹1.89 lakh crore in September 2025 (9.1% growth), validating the government’s claim that the volume of GST collections would rise with the rate cuts. The Confederation of All India Traders stated that lower GST rates and widespread use of Indian-made goods were directly responsible for the record-breaking performance.

The RBI kept the repo rate at 5.50% after cutting it by 100 basis points in 2025. This flexible approach, along with a better outlook for inflation (1.54% in September 2025, the lowest since 2017), made it easier for people to secure loans. Banks gave consumers lower rates through competitive festive loan schemes, democratizing credit in the economy. The strategically timed policy announcements, combined with the government’s multifaceted approach that included tax cuts, monetary policy, and credit democratization, led to the remarkable performance of the economy during the festive season.

Diwali: 2024 vs 2025

Diwali 2025 recorded a materially larger trade spike than 2024, with trade figures in 2025 reported around Rs 5.4 lakh crore for goods versus roughly Rs 4.25 lakh crore in 2024, implying a 25% rise in trade during the festival season. The policy changes in GST, rate cuts on many household and consumer durable items, and simplification of steps acted as a key catalyst for the stronger 2025 outcome.

Attribute	Diwali 2024 (pre-reform)	Diwali 2025 (post-reform)
Estimated total trade (goods and services)	Approx. Rs 4.25 lakh crores	Approx. Rs. 6.05 lakh crore
Main drivers	Normal festive demand; pent-up consumption in urban areas	GST rate cuts and simplification, ‘Vocal for local,’ ‘Swadeshi’ push, improved consumption
Sectoral Winners	Traditional retail, jewelry, sweets, garments, electronics	Consumer durables (TVs, refrigerators), electronics, local manufacturing, mainstream retail, and MSME supply chains
Area	Concentrated in metro and large cities; traditional markets	Greater participation, atleast 28% contribution from rural and semi-urban areas.
Price	Prices are broadly as before (E.g., a 32-inch LED smart TV costs Rs 14,999-Rs 16,990.)	GST rate cuts led to consumer price relief (Eg,. 32-inch smart TV—Rs 12,990–Rs 13,499)
Policy signal	No structural tax change	NextGen GST reducing tax slabs to two (5%, 18%), boosting sales and jobs

The Sectoral Winners: Where Diwali 2025's Growth Was Concentrated and Why

Automobile

For the auto sector, Diwali isn’t just a good month; it is a strategic pivot in the annual cycle. For consumers, it remains a time when economic aspirations and cultural beliefs align perfectly. The automobile sector has been one of the biggest winners of the festive season, delivering 15-35% year-over-year sales growth, which industry experts have described as ‘the fastest growth in over 10 years.’ India’s automotive industry is celebrating its most successful Dhanteras ever, with over 100,000 passenger vehicles expected to be delivered across the two-day festive period. The combined retail value of these deliveries is estimated at ₹8,000–₹8,500 crore. Two-wheeler sales, a crucial economic indicator in semi-urban and rural India, have been rising sharply as harvest incomes and festive sentiments converge.

Driven by festive optimism, GST 2.0-led affordability, and strong consumer confidence, the automobile sector’s performance has been nothing short of remarkable.

Gold & Jewelry

The gold and jewelry sector had perhaps the most paradoxical performance, reinforcing that cultural mandates and psychology around investment can surpass traditional price-demand relationships. A rare rally in the price of gold occurred in 2025, unlike any in recent years, with 24 carat at close to ₹134,800 per 10 grams on Dhanteras (October 18, 2025), an increase of 66-69% since Diwali 2024. The volume of purchases remained roughly similar to last year, but the monetary value surged 35-40% year-over-year.

This domestic phenomenon is part of a broader global gold rally, with international prices surging 58% year-to-date, driven by central bank buying, robust ETF inflows, and geopolitical tensions. India's gold market is also witnessing a growing interest in alternative investments. Gold ETFs have seen unprecedented inflows, with assets under management (AUM) doubling in 2025.

E-commerce

Online festival season sales touched Rs 60,700 crore in the first week, up 29 percent year-on-year, marking the strongest opening ever for India’s digital retail sector, according to a report by market intelligence firm Datum Intelligence. Tier II and III cities accounted for about 55 percent of total orders, underlining the digital momentum and purchasing power in smaller towns. This is reflective of enhanced supply chain readiness, smarter demand forecasting, and accelerated last-mile delivery, ensuring seamless and timely fulfillment even amid peak festive demand. E-commerce has established new structural expectations, and it remains to be seen how it will carry the momentum forward and ensure sustainable growth rather than just temporary festive growth.

The Employment Surge: Festive Season's Livelihood Impact

India's festive season is expected to generate over 2.16 lakh seasonal jobs in the second half of 2025, marking a 15-20 percent year-on-year increase in gig employment, according to a report by Adecco India. The rise in hiring can be attributed to sectors like retail, e-commerce, BFSI, logistics, hospitality, travel, and FMCG. At the forefront of generating employment during the festive season is the e-commerce sector.

Amazon India alone created over 150,000 employment opportunities, whereas Flipkart announced the hiring of more than 100,000 temporary and gig workers, which included opportunities for women as well as PwDs. Quick commerce platforms, including Blinkit (Zomato), Instamart (Swiggy), Zepto, and others, collectively expanded gig workforces to accommodate the extraordinary 120% order volume growth. Large Q-commerce and E-commerce players are projected to retain 26 percent of this expanded workforce beyond the festive window, which suggests a structural shift rather than a seasonal spike. It is important to acknowledge that gig employment has increased; the conditions of their employment tell a concerning story. For these gig workers, the festive season brings longer working hours, falling per-order payouts, and rising order volumes. 

A defining characteristic of employment generation has been the Tier-II cities driving the growth with a 42% increase over last year, whereas metro cities saw a 19% increase over last year. Metro markets witnessed wage increases of 12-15%, while emerging cities saw increases between 18-22%. This reflects a tight labor supply in smaller cities, resulting in platforms paying a premium for good workers in less developed labor markets. There were positive indicators for improving gender inclusion. The data indicated a 23% year-over-year increase in the percentage of women participating in seasonal hiring, which is attributable to the increasing interest in flexible, short-term work that is compatible with household responsibilities.

The Consumer-Led Aatmanirbhar Bharat Movement During Diwali

This festive season, the Indian consumer reflected an overwhelming sense of national pride and showed a strong preference for domestically manufactured goods. A thorough survey by the Confederation of All India Traders (CAIT) surveyed 60 distribution centers in different cities (Tier 1, Tier 2, and Tier 3) and stated that throughout the survey, 87% of consumers unequivocally preferred domestic goods over foreign (i.e., Chinese-manufactured) goods during the festival. 87% of customers preferring domestic goods as opposed to foreign goods resulted in Indian manufacturers experiencing a 25% increase in sales as opposed to the prior year, while demand for Chinese-manufactured goods plummeted throughout the country.

CAIT Secretary General Praveen Khandelwal said Chinese goods lost a trade worth more than Rs 1 lakh crore during the Diwali festive season. "In previous years, Chinese products occupied nearly 70 percent of the market of Diwali festivals. However, this year, the appeal of Prime Minister Narendra Modi to make this Diwali vocal for local has gone down well and been widely accepted and implemented by both traders and consumers," he said. The decrease in demand for Chinese products reflects a structural change in the psychology and purchasing patterns of the Indian consumer, which are deemed to have optimistic returns in the future. 

Despite overall advancements, Aatmanirbhar Bharat was met with reality checks in specific product categories. The emblematic LED string lights and decorations that represent traditional Diwali imagery continued to be supplied by Chinese imports, with estimates that China exports approximately ₹710 million-worth of LED light-related products to India on an annual basis.

Challenges Ahead—Sustaining the festive momentum 

Nevertheless, this moment of achievement poses a dilemma: how does India sustain and institutionalize the gains of Diwali 2025 beyond the four-week festival period? The GST reforms have led to an impressive increase in consumer spending, but it remains to be seen whether the consumption growth can justify the net loss of around Rs 2 trillion from tax reforms. State governments have raised concerns over the loss of revenue under GST 2.0, which needs to be addressed by the central government. The 26% retention of gig workers following the festival is promising, but it falls far short of what workers hope for—a permanent job. The continued dominance of China in LED lights and certain types of decorations shows the gap that exists between the aspirational Aatmanirbhar Bharat and manufacturing.