Could you throw some light on the challenges faced by the industry?
Increase in input costs and the weakening rupee has had an adverse impact on the sale of air conditioners and refrigerators. Growth has been subdued because products have got costlier by 5-12%. However, green shoots are visible as there has been some pick-up in demand. The booming stock market will foster optimum demand and positively impact the industry.
How are these challenges impacting growth?
With import content of inputs high, the sector has been adversely affected by rupee depreciation in the last two years. It makes goods dearer, translating into a slack in demand and poor sales. There is a strong co-relation between price and demand for consumer electronic and home appliances sector. Our sector is also adversely affected by imports at zero or concessional import duty under free-trade agreements (FTA).
What can be done to correct this?
For the industry to bounce back, CEAMA strongly proposes removal of the inverted duty structure on consumer electronics and home appliances, arising due to implementation of FTAs. We also recommend review of existing FTAs, which have not been in favour of the industry overall, and not to sign any new FTAs for the next five years. The government should also accelerate implementation of uniform goods and service tax (GST) which will lower transaction costs. Also, provision of 'C' form waiver should be applicable to set-top-boxes (STBs) as applicable for telecom. The government needs to provide same incentives to home appliances industry which are available to consumer electronics industry as these products have substantial electronic parts. Therefore, there is an urgent need to promote manufacturing of these products and its inputs within the country.
How will these initiatives help change the overall business environment?
Consumer durables is a very important part of the economy, contributing over 5% to IIP. It is an employment incentive sector, where one job in manufacturing creates three more in allied sectors. The sector helps improve the quality of life, increased efficiency at workplace and provides information and entertainment to masses. Our recommendations are made with twin objectives of manufacturing growth and increasing product demand. It will lead to greater economic activity, more jobs would be created and government would get more revenue, which could be then spent on social sectors such as health and education.
What kind of growth can be achieved through these initiatives in the next 3-5 years?
The penetration of our sector products is very low in our country. More than 50% of households are still without a television. About 20% households have refrigerators, 7% own washing machines and less than 3% have air conditioners. We expect that with right policies we can easily achieve growth of 15% to 20% growth annually.
Of all recommendations made, what is likely to come by in the budget?
We are confident that the budget will have clear roadmap for introduction of GST with moderate rate of taxes. We are also confident that smaller sized panel will be allowed to be imported at zero import duty at par with bigger sized panels. We are feel that the provision of 'C' form waiver would be applied to STBs, as the present policy is very unfavourable to domestic manufacturers. All other recommendations which encourage domestic manufacturing will be considered.