The Nepali people go on a spending spree during Dashain as befits the country’s biggest and longest festival. The most popular purchases during the festive season are clothes, electronic appliances and automobiles.
According to the Department of Customs, imports of food, garments and vehicles have jumped 20 percent in the last two weeks. Similarly, shipments of other goods have risen more than 10 percent.
No wonder traditional shops in the bazaar and fancy department stores alike roll out the red carpet for customers during this time. Shopping complexes and large stores offer discount schemes and provide gifts to lure customers. This is the time consumption drives the economy.
According to an estimate of economist Keshav Acharya, 25-30 percent of the expenditure on consumption takes places during this season. The total estimated household consumption in the last fiscal year was Rs 1,430 billion, according to the Economic Survey 2012-13.
This means Nepali consumers bought goods worth Rs 357 billion to Rs 429 billion, as per Acharya’s calculation. Remittance and Dashain bonuses received by public and private sector employees play a vital role in increasing consumption.
“Government employees and former employees earn around Rs 20 billion as double salary and pensions for Dashain,” said Ram Sharan Pudashaini, spokesperson at the Ministry of Finance. “Most of the money is spent on consumption.”
According to Nepal Rastra Bank spokesperson Bhaskarmani Gnawali, an additional Rs 10-15 billion is
withdrawn from the banking system during the festival season. The increased amount of cash in people’s pockets due to higher incomes and greater remittance flows has energized the market.
Migrant workers not only send home money for their families to splurge during the festival, most of them return home with bulging pockets and spend lavishly amid the buoyant mood.
Moreover, the people’s purchasing power has been growing, the country’s poverty level has been decreasing and a growing number of people are climbing up to the status of the middle class. The markets, as a result, are in a frenzy with high spending throngs on the loose.
According to an Asian Development Bank study, Nepal has a middle class population of 6.1 million, which is 23 percent of the national population. The poverty level has declined to 23.8 percent as of the last fiscal year from 25 percent two years ago, according to the Central Bureau of Statistic.
However, remittance is the key factor that has increased the spending power of the people. Dashain is also the time when the country receives a higher amount of remittance inflows.
According to Chandra Tandan, managing director of City Express Money Transfer Agency, remittance during Dashain has grown 20-25 percent. If the recent appreciation of the US dollar had lasted longer, the growth rate would have been in the range of 35 percent, he said.
During the month prior to the Dashain festival, remittance inflows in the country reached Rs 32 billion. As the rising trend in remittance inflows is continuing, it is estimated that a greater amount was received before the festive season began.
Remittance has greatly contributed to lifting rural consumption patterns, and during Dashain, rural consumption soars higher.
Economist Acharya said that even though most of the expenditure takes place in urban areas, the consumption is destined for rural areas as the people return to their villages
to celebrate the Dashain festival.
Usually, urban people are tops in terms of spending, but during this season, rural people are at the forefront in spending.
For traders, the festive season is the best time of the year as it accounts for almost half of their annual business. Keshav Bahadur Rayamajhi, vice-president of the Nepal-Trans Himalayan Border Commerce Association, said 40-50 percent of their business takes place during the two months of the festive season.
Cheaper Chinese goods are the most popular purchases in the domestic market during the festive season. Most of the goods imported from China for the Dashain festival are garments, footwear and electronic appliances. Rayamajhi said that goods had become dearer by 30 percent this year due to a stronger US dollar.
Food items are mostly produced locally or imported from India. Automobiles are another large import from the southern neighbour. “Automobile sales rise 30-35 percent during Dashain,” said Shekhar Golchha, president of the Nepal Automobile Dealers’ Association (Nada). Annual auto sales in the country are estimated to be worth Rs 100 billion, according to Nada.
Meanwhile, excess liquidity in banks and financial institutions (BFIs) and lower interest rates on auto loans have pushed up sales of automobiles.
“We have received very good feedback this time,” said Golchha. “It is probably due to increased remittance and good liquidity position in the banking sector.”
Currently, banks are offering auto loans for as low as 10 percent. When demand for loans from other sectors has not been so good, auto loans have helped banks to increase their business, according to bankers.
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