As the interim budget approaches, the consumer durable industry is hopeful for a host of changes that could potentially accelerate growth in 2024. A possible reduction in GST rates and an extension of schemes such as the Pradhan Mantri Awas Yojana could incentivise growth for the sector.
"We expect a robust government initiative to bolster local manufacturing of electronic products. Industry players are advocating for a reduction in GST on essential appliances from 12 percent to 5 percent,” Axis Securities said in a pre-budget report.
GST, Slashing Import Duty
Reducing the current import duty on important components such as semiconductors and compressors (used in washing machines, air conditioners, and refrigerators) could make production cheaper and drive down prices for consumers. "This could lead to a 15-20 percent increase in sales, impacting the sector by Rs. 10,000-15,000 crore,” said Balasubramanian A, Vice President, TeamLease Services.
"For example, reducing import duties for washing machine components to 10 percent from 20 percent could bring down production costs by 5 percent".
Industry experts suggest that the government ought to support consumption. In line with the strong GST trend, it is anticipated that the government could reduce the GST on LED TVs larger than 32 inches to 18 percent in Budget 2024. Further, PLI schemes must be expanded to include smart TVs, refrigerators, and washing machines.
"As a seller, I would certainly want a reduction in GST, Nilesh Gupta, managing director of Vijay Sales, told Moneycontrol. It must be noted that while the decision to cut rates can only be taken by the GST Council, the Finance Minister can make such a proposal in the Budget.
PLI schemes, renewable energy to aid growth
"A continued emphasis on existing schemes like the Pradhan Mantri Awas Yojana, which witnessed a 66 percent growth to Rs 79,000 crore in the FY23 budget, is anticipated to further enhance the housing and housing products segment,” said analysts at Axis Securities.
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Under the new Pradhan Mantri Suryodaya Yojana, the government aims to install rooftop solar power systems in 10 million households in India. While it had launched the Rooftop Solar Programme in 2014 with a target solar installation of 40GW by FY22, it could achieve only 11GW by FY22 due to several constraints including high dependence on imports and inadequate awareness among households.
"With increased domestic manufacturing and fresh impetus from the state, we believe the scenario appears promising for solar panel manufacturing companies and electrical companies over the next 3 years,” JM Financial said in a report.
Focus on ‘Make in India’
"The government must prioritise research and development and streamline the supply chain. Addressing the tax structure on televisions is crucial, which are currently taxed at 28 percent on TVs larger than 32 inches,” said Ankit Maini, Managing Director of Veira Group.
He recommended a universal reduction to 18 percent, adding that as the television industry evolves, it becomes a significant economic contributor through job creation and increased demand for domestic components.
Most consumer durable categories have endured a rather difficult 12-18 months on the back of inflation-led pressure on demand and margin. However, analysts are of the view that most headwinds are now seemingly behind and consumer durables demand is said to revive and remain constructive in the sector over the medium-long term.
HDFC Securities believes that there is a long runway for growth amid resilient housing demand, and rising consumer aspiration-backed premiumization trends. "The government’s thrust on "Atmabirbhar Bharat" and "Make in India for the World" is likely to open up avenues to the largely untapped global opportunities."
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