The announcement of the increase in basic Customs duty on indoor and outdoor units of split system air conditioners (AC) from 10 per cent to 20 per cent, is being considered a boost to the Make in India (MII) initiative by industry experts, as it will make imports expensive.

However, consumer electronics industry players are looking for measures to boost consumption.

“We were hopeful of concrete measures that would accelerate demand,” said Kamal Nandi, President, Consumer Electronics and Appliances Manufacturers Association (CEAMA) and Business Head and EVP, Godrej Appliances.

B Thiagarajan, Managing Director, Blue Star Ltd, told BusinessLine, that the increase in duty is not significant and that the real issue is whether the Budget will revive economic growth, generate more jobs and increase disposable income.

“I am more concerned about the consumption than the customs duty, which is a small, negligible issue. We knew that Customs duty will go up (and that) MII will be encouraged,” he said.

While outdoor units have by and large been indigenised, indoor units are yet to achieve the same degree of localisation, which will now be boosted, CEAMA said in a statement.

“The increase is expected to have marginal impact on the market. A large proportion of completely-built AC units in India is imported and the basic Customs duty on these is already at 20 per cent. Further, large domestic players have their own manufacturing base in India. Thus, around 10 per cent of the market will be impacted as a result of change in basic customs duty,” said Hetal Gandhi, Director, CRISIL Research. CEAMA said that the electronics hardware production in the country increased from ₹1.90 trillion ($ 31.13 billion) in FY14 to ₹3.88 trillion ($ 60.13 billion) in FY18 and that the demand for electronics hardware in India is expected to reach $ 400 billion by FY24. “The above initiatives (that the budget spoke about) will surely serve as major growth drivers in expansion of the segment,” said CEAMA.

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