Experts fear those factors combined could lead to a surge in coronavirus cases, especially in the capital where infections are already surging.
Diwali is the five-day Hindu festival of lights, and beginning on Saturday, friends and family will come together to feast, set off fireworks and light colorful lamps. For many of the country's 1.3 billion people, it's the most important festival of the year and is equivalent in importance to Christmas in many Western countries.
But this year, it's being held during a global pandemic.
India has reported more than 8.7 million coronavirus cases, more than any other country in the world besides the United States. While the country is now reporting fewer cases than at its peak in September, cases are rising again in the capital New Delhi, which reported a record number of daily fatalities on Thursday.
The authorities are warning holidaymakers to practice social distancing, but this week market places continued to throng with shoppers ahead of the festive season.
And in most parts of India, including Delhi, people are still allowed to hold gatherings of up to 200 people.
"Everywhere it is splashed that cases are increasing but despite that people are throwing caution to the wind and shopping," said Arvind Kumar, the founder and managing trustee of non-profit Lung Care Foundation. "I won't be surprised if cases rise across India."
Why Diwali could mean a spike
Diwali poses a double threat to controlling the spread of coronavirus: increased social gatherings amid worsening air quality.
India's annual pollution season is chiefly caused by farmers burning fields to prepare the land for its next crop, choking cities in smog.
The firecrackers, which continue to be used during Diwali despite an official ban in the capital and other parts of India, only exacerbate the quality of the air.
New Delhi's air quality hit "emergency" levels this week. That's the highest category, and means that construction has been reduced and neighboring states have been asked to take action to stop burning land.
"We are seeing all around us the skies are filled with smoke and coroanvirus cases are also rising because of this," New Delhi chief minister Arvind Kejriwal said earlier this month.
Kumar said that the current spike in the capital is due to a major festival a few weeks earlier -- warned that the festivities could prompt an increase in cases in coming weeks.
"When I go home in the evening, I see huge crowds of people in markets, many of them are not wearing masks, they are not practicing social distancing, there is huge crowds inside the shops, around the shops, in the street, and pollution levels are still high," he said Thursday.
"These two deadly cocktails are still operating and I fear that we may see even further spike in number of cases in the coming weeks."
How authorities are responding
Changes have been made to some regular festivities to try to stop the virus spreading on diwali.
Delhi will hold a live telecast of a prayer ceremony so that people can celebrate from home rather than gathering in public, Kejriwal announced. Authorities have also disallowed the celebration of Chhath Puja on waterfronts -- a ritual when hundreds of people enter a river at the same time.
India's Prime Minister Narendra Modi launched a campaign last month to promote Covid-19 appropriate behavior such as social distancing "in view of the upcoming festivals and winter season as well as the opening up of the economy."
India's Health Minister Harsh Vardhan posted a campaign promoting social distancing during the festive season using the hashtag #DiwaliInTimesOfCorona.
Ahead of the celebrations, the Delhi government has also taken steps to curb pollution, including urging car drivers to turn off the motor as they wait at red lights, Gopal Rai, Delhi's Environment Minister told reporters Wednesday.
Kumar said there could have been stronger messaging from leaders to reinforce the need to social distance.
But Om Srivastava, an infectious diseases expert and member of the Covid task force in the state of Maharashtra, which is one of the worst hit by coronavirus, said there was only so much the government could do. Instead, he urged people to take responsibility themselves for stopping the spread.
"There is a caution fatigue," he said. "There definitely is a mental fatigue that has set in."
CNN's Manveena Suri contributed reporting from New Delhi.