Lights, Gifts and Expectations: Why Indians gift beyond tradition

Writer: Shaurya Taneja

Editor: Krithi Kankanala

It is the week before Diwali, and you buy a gift hamper worth Rs. 5000 for your friend Rajesh, since you’ve visited his place, had a good laugh and a few drinks. Rajesh now feels guilty, since his own gift feels “too small” compared to the gift you gave him. Now, he rushes to the nearest mall and buys a costlier showpiece for your house, and only then does he  visit your place. Behind all this celebration and smiles lies a subtle play of psychological effects such as reciprocity, social comparison, and emotional balance.

Diwali, the festival of lights is one of the most anticipated festivals in India for households and businesses alike. Traditionally, it involves cleaning the house, buying new items and more importantly, sharing joys among each other. This invites a massive consumer exchange of various gifting items such as sweets, clothes, gold, electronics, and many more amongst millions of homes and businesses. Yet, despite the festive joy, Diwali gifting often brings overspending, social pressure and emotional pressure along with it. People struggle to balance generosity with expectation and obligation. This act of giving can create a feeling of indebtedness and unspoken comparisons.

In this blog, we explore the intersection of behavioural economics and consumer psychology behind gifting and reciprocity during Diwali. This blog will unpack what motivates people who give, how people who receive these gifts respond to them and what this means for the market and society, overall.

Reciprocity and Emotional Obligation

Psychologist Robert Cialdini explains reciprocity as one most powerful norm created by humans, that is, when someone gives us something we feel compelled to return the favour. Something like this is not unknown during Diwali, where a gift unintentionally becomes a social contract. Rajesh also felt uncomfortable with the fact that his gift was not “good enough” even though he had put in effort to get you one. This feeling of discomfort creates a feeling of obligation to give an equal or better gift. This creates a social balance with symbolic exchanges of gifts.Unlike birthdays or any other social event, Diwali is set as a reciprocative event. From corporate Diwali hampers to employees, to mithai boxes exchanged amongst neighbours, the expectation of returning the gift is set. The Indian culture of Shagun embeds reciprocity, moral and religious values.

Shagun (शगुन) refers to a traditional Indian custom of giving a symbolic token or money as a gesture of good fortune and blessings. It is relevant to Diwali because it connects material giving with spiritual intention. The act of Shagun reinforces moral obligation and emotional reciprocity during festivals, forming an integral part of the gifting culture.

Gifting is meant to create happiness, but research shows that how we gift matters more than how much we give. Spending on others should increase happiness only when it feels meaningful, not when driven by obligation. During Diwali, the social energy of generosity can easily become competitive. People sometimes buy more to prove affection, not express it.

Interestingly, this can take away the happiness that gifts are meant to bring, a situation psychologists refer to as the reciprocity trap. When gifts are picked with care instead of strategy, they help build stronger bonds and make us feel better emotionally. However, when the choice is based on guilt or social pressure, it often causes anxiety and regret after buying. Therefore, the key is to find back the simple emotions of Diwali, giving with purpose rather than through obligation.

Loss Aversion, Status and the Endowment Effect

Behavioural economists Daniel Kahneman and Amos Tversky showed that people experience loss aversion, that is, the pain of losing something feels stronger than the feeling of gaining something. During Diwali, when someone gives us an expensive gift, we subconsciously feel that we have lost status and respect compared to the person who gifted it to us. To restore this so-called “lost status,” we tend to overcompensate with a better and more expensive gift.

The endowment effect, first described by Richard Thaler , means that people tend to value an item more simply because they own it. In the context of Diwali gifting, once we receive a gift, we start valuing it more than it may actually be worth because it now belongs to us. This makes us feel more indebted than we should and further increases our desire to reciprocate.

In fact, according to a NielsenIQ report, over 70% of Indian households increase discretionary spending by at least 30% during the Diwali period.

Gifting as a Signal

Gifting also acts as “signals”. According to Micheal Spence’s signalling theory, individuals tend to give expensive signals to convey certain information. A thoughtful and caring Diwali gift shows warmth, respect and compassion for the other person. The value is not only in the rupees we spent on the gift but the time and effort we put in thinking about others. Who knows, maybe Rajesh made something by hand for us but got pressured to throw it away and instead bought the more expensive one to signal that he cares, or to display his financial status. What we gift to others speaks volumes about who we are, and we wish to be seen.

Behavioural Nudges and Market Strategies

Corporations have also learned from market trends and have been profiting off of this cultural phenomenon for a long time. During Diwali, marketing campaigns use behavioural nudges and cultural symbolism.

A behavioural nudge is a subtle cue or design choice that influences behaviour without restricting it. Advertisements are often seen using taglines like “Share the light” and “Return the joy”, creating the feeling of reciprocity. Even E-Commerce stores use anchoring (presenting high priced items first to make subsequent items seem reasonable) and scarcity framing (only for a limited time) to drive higher purchases. Bundled gift hampers use mental accounting bias where consumers justify higher spending when the cost is spread across multiple items.

A Kantar India (2022) survey revealed that 64% of urban Indian households feel socially obligated to return gifts even though it exceeds their given budget. The basic principles of demand and supply play their role and due to extreme demand for sweets and other gifts combined with limited supply, there is high inflation in their prices.

Economic and Social Outcomes

While economists might see Diwali gift-giving as inefficient, behavioural economists see sustainability and increase of social capital, where each box of sweets becomes a token of goodwill, sustaining social bonds, transforming economic transactions into emotional currency.

Conclusion

Gifting during Diwali isn't just a traditional practice or a shopping spree; it’s an experience where feelings and spending come together. By understanding the influences of social rules and signals, we can be not only wiser shoppers but also more thoughtful givers, those who give because they care, not because they must.