Gloomy Diwali: Middle class is only window-shopping

White goods majors are gearing up for a subdued festival season as a spiralling inflation and uncertain economic situation are forcing consumers to hold back their purchase decision this year.

According to an Economic Times report , sales at top retail chains and estimates by brands indicate unsoldstocksof mobile phones and home appliances piling up because of this.

KS Raman, director at Next Retail, India’s largest consumer durable retailer, told ET, “Walk-ins and enquiries are there, but final transactions are not happening.”

Companies say unlike other years, people are not buying new phones or laptops ahead of the Diwali season.Panasonic, Sony, Spencer’s Retail and The Mobile Store saythat growth has slowed over the last year and has even halved in some segments.

Despite the discounts that almost every retailer, including online shopping sites, are offering, sales are low.Himanshu Chakrawarti, CEO of The Mobile Store, told ET, “Demand is low, with sales growing at low double-digits unlike the usual 25-40 percent growth we notice during Diwali."

Demand for goodssuch as refrigerators, washing machines and microwave ovens are down by more than 50 percent over the last year.

In fact, both Onam and Durga Puja sales were also dull compared with last year.

The lower-than-expected sale is a body blow to the companies, as festival season accounts for about 30-40 percent of their annual sales.

So, why are consumers not spending ahead of Diwali?

Inflation may be the biggest reason. With higher interest rates and higher food inflation, the disposable income of middle class has dropped, thus making them unable to splurge ahead of the festive season.

Recently, the Reserve Bank of India (RBI) banned the0% equated monthly instalment (EMI) credit card scheme on purchase of consumer goods andasked banks to offer uniform interest rates and processing fee. This may be another reason for the drop in sales.

“Such schemes only serve the purpose of (luring) and exploiting vulnerable customers,” an ET report quoted from a confidential note sent to banks by the central bank on 17 September.

The notification had come just ahead of the festival season, when consumer goods companies cash in on the upbeat sentiment in the economy by offering many visibly attractive loan schemes for everything from phones to LCD TVs.

Himanshu Chakrawarti, CEO of The Mobile Store was quoted as saying,“The way forward for the measures suggested by RBI is justified, but the notice given is so short ahead of the festive season and in the middle of a dull economy, that sales are likely to take an instant blow.”