Much depends on what "burns the confetti away" means.
It would be overpowered to have a torch in one hand, cast the cantrip with the other, and direct the fire damage to any square within range, no save and no hit roll. However, my reading of the spell would indicate that in this situation, the stream of confetti would ignite in the square of the caster, damage them, and then be burned away by the time it hit the target square, for no damage but perhaps a gust of hot wind. This reading would not be overpowered, since the caster could not both be the confetti source and flame source. It does mean that casting the spell could take advantage of someone else holding or standing next to a flame source, but since such targets of opportunity are situational, I do not consider that overpowered.
Similarly, you could target a square within 30 feet, start the confetti, and then 'walk over and ignite it' with no save and no hit roll. But this is analogous to walking over, pouring out (not throwing) an oil flask, and then igniting it for automatic damage without a hit roll or save. You can do that, but the risk to a caster of voluntarily putting themselves within an opponent's reach balances out the low 'automatic' damage. Also not overpowered, in my opinion. And worth noting that since this burns away the confetti, my reading is that it would end the duration of the spell if it had turns remaining.
Lightly obscured can have interesting interactions
Such a small area of effect means that it will be little use in partially blinding an opponent; they can just leave the area. But it could see use in obscuring an object, oneself, or an ally. Suppose you, a clown-fairy, have the party trapped inside your circus wagon with the only way out a secret door. Your ally, a rat-fairy, is currently Hidden and moving in to Sneak Attack one of them. On your turn you ready an action to cast your cantrip.
Your ally steps on a squeaky floorboard, threatening to give himself away (low Stealth roll)? Shoot the confetti at his target, dropping their Passive Perception by 5 from disadvantage and maybe preserving your ally's Hide.
Party starts to Investigate the wall of the wagon, looking for the secret door before you are done monologuing? Shoot the confetti at the wall to disadvantage their Investigation roll while you say, "It's not over there!"
Party tries to make an Insight on you to see how seriously to take your monologue? Confetti yourself to disadvantage their Insight.
Also, wild elves get 'mask of the wild' that allows them to hide when lightly obscured by natural conditions. As a DM, give 'mask of the wild beyond the witchlight' to all your clown-fairies, so they can confetti themselves before Hiding, as the equivalent of a ninja smoke-bomb. Poof! you're gone!