With the rupee breaching 68 against the US dollar, consumer durables are likely to become dearer by up to 7 per cent, even as consumption demand continues to crumble and the festive season is round the corner.
“Yes, it is certainly going to impact the industry, especially where import content is high. The cost of input is going up. Industry is already working on thin margins. The sector is highly price elastic. All white goods and brown goods are going to become expensive. Given the elasticity, if the prices go up by 1 per cent, demand comes down by 3 per cent,” Suresh Khanna, secretary general, Consumer Electronics and Appliances Manufacturers Association (CEAMA), said.
He added that even good monsoons have failed to cheer the industry due to the depreciation of the domestic currency.
He said that most of the electronic goods have very high import content. For instance, products like picture tubes, washing machines timers, are not manufactured in the country, while goods like microwave and ovens are imported as completely built units in India.
“So, naturally, their prices would go up even during the festive season, anything between 4-7 per cent, depending on the sector,” he said.
According to industry estimates, due to slowdown and rupee depreciation, in July the consumer electronics and home appliances sector contracted 30 per cent. Electronic products including raw material worth $31 billion were imported last year, he said adding that in May, 1.75 lakh flat-panel TV sets were imported, of which 1.4 lakh were under the duty-free regime.
Reflecting the scenario, S&P BSE consumer durables dropped 2.32 per cent on Wednesday. It was down 2.97 per cent Tuesday while a week ago, on August 21, it declined 3.19 per cent. A month ago, too, consumer durables shares fell 13.97 per cent, mirroring the sentiment of the sector.
Apart from the, economic slowdown has also impacted the sector, as evident by contracting production of consumer durables. The Index of Industrial Production shrank 8.9 per cent in April, 10.4 per cent in May and 10.5 per cent in June. For the period April-June, it contracted 12.6 per cent, showing the shrinking consumption demand.
“Prices will go up of all consumer goods as basic raw material like steel and power has become expensive. Import content is another issue. It is not restricted only to consumer durables. However, I don’t think it will impact festive season sale. People who have been buying will continue to do so,” Venugopal Dhoot, chairman, Videocon Group, said.
‘Issue sovereign bonds, exempt FIIs from capital gains tax’
New Delhi: India must take urgent measures like issuing sovereign guaranteed bonds and exempting FIIs from short term capital gains tax to stem the rupee’s slide, India Inc said on Wednesday.
“Consideration has to be given to issuing a sovereign guaranteed bond which would be of a substantial amount. Additionally, we need to explore if FIIs can be exempt from short-term capital gains tax,” CII president Kris Gopalakrishnan said.
“While the government and the RBI have been taking measures to curb speculation, more needs to be done on this front to remove the avoidable edge to volatility,” CII said.
President of PHD Chamber of Commerce and industry, Suman Jyoti Khaitan, said,“You have to increase supply by investment in capital goods sector. Export sector must be given a boost to reduce the CAD.” pti