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Corporates to cut gift budget by 50% this Diwali: Survey

Corporates blamed the prevailing economic slowdown both in India and abroad with decelerating industrial growth leading to an upward spiraling inflation, high cost of credit, dropping operating profits and difficult trading conditions for going slow this festive season

November 05, 2012 2:41 IST | India Infoline News Service
India Inc. this Diwali is severely cutting back its corporate gift budgets by a whopping 45%-50% as costs balloon and earnings together with profit margins shrink by the day, according to a ASSOCHAM survey.
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) carried out a survey during October to ascertain the ‘Diwali Gifting Intentions of India Inc.’
The ASSOCHAM representatives interacted with about 150 companies with an employee strength of 500 and plus operating in the domains of pharma, BFSI (banking, financial services and insurance), auto, hospitality, FMCG, manufacturing, energy and infrastructure sectors in 10 cities—Ahmedabad, Bangalore, Chennai, Delhi-NCR, Hyderabad, Jaipur, Kolkata, Lucknow, Mumbai and Pune.

“Just like the last year, this year too the business houses are bracing for a muted Diwali affair evidently as majority of respondents of ASSOCHAM survey have tightened their purse strings and have slashed their budgets for Diwali gifts significantly,” said ASSOCHAM secretary general, D.S. Rawat.

Of the 150 companies interviewed, about 30 of them said they have decided to entirely do away with gifting concept this year and would use the extra funds to better use, highlights the ASSOCHAM survey.

While about 90 respondents i.e. the majority of the total of those interviewed said they are going to spend less on gifts for their corporate connections this year and have drastically scaled down their budgets by about 45%-50% in this regard.
Corporates blamed the prevailing economic slowdown both in India and abroad together with decelerating industrial growth leading to an upward spiraling inflation, high cost of credit, dropping operating profits and difficult trading conditions for going slow this festive season.

Of the remaining, about 12 respondents said their company has shortlisted very selective list of clients to whom they would distribute personalized gifts. Digital cameras, branded watches, pens, wallets, affordable tablet computers, chocolates and sweets gift hampers and smart phones have replaced the large dry fruit packs, luxury gift items, gold coins, according to the ASSOCHAM survey.

ASSOCHAM representatives even interacted with dry-fruit traders in Khari Baoli area of Delhi, one of the largest spice and dry fruit market. Of about 40 of shops surveyed, almost all respondents said their Diwali business has never been this dull as corporate orders have nose-dived by about 75-80 per cent.

It was also ascertained that prices of dry fruits have gone up by almost 25% this Diwali. Retail gift wrapping industry is also likely to feel the heat as gift sales suffer this Diwali.

Many company representatives even said they have deferred their plans for holding an annual Diwali party for their employees and are not distributing any festive bonus whatsoever owing to a weak business performance.

While India Inc had spent over Rs 2,000 crore on Diwali gifts in the year 2009, according to rough estimates by ASSOCHAM, the corporates had increased their gift budget by an astounding 60 per cent in 2010 as the estimates reached to Rs 3,200 crore according to ASSOCHAM.

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