The consumer durable goods sector has shown a quantum leap in growth, owing to strong fundamentals of the economy and emerging opportunities, in terms of technological improvements, falling prices due to competition, aggressive and innovative marketing, and declining import tariffs. This was found out in a comprehensive survey on the sector that was conducted by the Federation of Indian Chambers of Commerce and Industry (FICCI).
According to the survey, the consumer durable goods sector is worth around Rs 35,000 crore in 2006-07 with 11.5 per cent growth, against 8.5 per cent growth the previous year. The sector is also expected to achieve about 12 per cent overall growth in the year 2007-08. It is projected to achieve excellent growth rates of more than 20 per cent in terms of quantity produced in high-end TVs, MP3s, DVDs, split ACs, high-end washing machines, micro wave ovens, etc.
With rising GDP growth and purchasing power of people, there has been a discernible shift in the consumers’ preference in favour of high-end, technologically superior branded products and new models, despite recent price hikes made by companies to offset rising costs across all segments.
At the same time, attractive schemes by financial institutions, commercial banks and from companies themselves through their extensive dealer network are attracting consumers. Besides, companies are also exploring new media to outreach markets for consumer durable products, leading to intelligent sale of products.
The industry is also developing innovative products like technological upgradation and pricing, which are currently the key drivers in a competitive market. For instance, post Videocon’s acquisition of Electrolux, the company is working towards increasing its presence across India, while Godrej & Boyce is planning to double its frost-free refrigerator manufacturing capacity by augmenting its plant in Shirwal near Pune, with an investment of around Rs 100 crore. Also, LG, Voltas and Whirlpool are going aggressively on mass volumes segment, while Sanyo-BPL is also set to launch home and industrial ACs to take advantage of the retail boom in the country. The industry is expecting more growth to take place in class B and C towns, rather than in metros.
Many companies are also reworking strategies and setting up new retail units to ensure brand visibility and promote growth. The possibility of FDI in retail has also led existing retailers to enter in this segment.
The FICCI survey also highlights some of the basic issues and difficulties that are being faced by the industry, and highlights the need for taking some pro-active actions and measures that should be taken by the government to enable the industry to have sustained growth.
Some of the core issues that need to be tackled are the increase in input costs due to rising prices of copper, steel, aluminium, plastic, etc.; high excise duty of eight per cent; high level of sales tax, of 12-20 per cent; fluctuation and appreciation of the rupee; inadequate availability of finance; and poor and inadequate infrastructure, in terms of power and transport in major parts of the country.