The Hindu Business Line : Consumer durables sector eyes double-digit growth

AFTER a period of slow growth and stagnation, the consumer durables industry seems to be picking up momentum and is hoping to close the current fiscal in the pink of health. "The industry is expecting to clock double-digit growth," industry insiders reveal.

Based on recent trends, the Indian refrigerator market is expected to grow to an estimated 3.7 million units (3.4 million in 2003), the washing machine market is expected to grow to 1.45 million units (1.36 million in 2003) and room air-conditioners (RACs) to around one million units (0.85 million in 2003) during 2004, according to ICRA.

"The sales of consumer durables increased during 2003 after a period of stagnation. Further, as indicated by production and demand figures for 2004, the durables market has sustained the momentum that it picked up during 2003. For example, during April-September 2003, refrigerator production aggregated 1.77 million, representing a year-on-year increase of 28.1 per cent over April-September 2002. Companies have also reported healthy growth in sales volumes during the festive season (September-October 2003)," ICRA sector analysis (April 2004) reveals.

As per the Consumer Electronics and TV Manufacturers' Association (CETMA) estimates, the industry is looking at clocking a 12 per cent growth in refrigerators, 5 per cent in washing machines and more than 20 per cent in RACs during 2004.

Prior to liberalisation, the sector in India was restricted to a handful of domestic players such as Godrej, Allwyn, Voltas and Kelvinator. With liberalisation came a spate of foreign players, from Sony to LG Electronics and Samsung India; thus, the consumer had a plethora of choice, analysts point out.

But what are the growth drivers for this industry? "The demand for consumer durables hinges on a number of factors, some of which are universally applicable even as the others are specific to items. Among the universal demand drivers, affordability is the major one. The increase in middle- and upper middle-class income households, combined with a relative reduction in prices owing in particular to a decline in duties and taxes, has led to an overall growth in affordability levels," ICRA report says.

Another major demand-influencing factor is access (or lack of it) to infrastructure, such as regular power supply and running water. Also, lifestyle parameters have a significant role to play, with the ownership of durable goods increasingly being seen as a source of social status, especially among urban households, the report states.

Further, the availability of consumer financing schemes from banks and other financial intermediaries has made the acquisition of durables more convenient, and has been a major demand driver. Replacement demand has also had an impact, thereby creating a market for slightly older assets with price tags suitable for lower-income households, the report adds.

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