Budget 2004-05: Consumer Durables The rise in excise duty on clocks and watches is likely to increase price of products. Given the competitive nature of the industry, whether manufacturers are in a position to pass on the rise in cost to consumers remains to be seen. Key players like Titan and Timex are likely to be affected. The penetration levels across the segment in the industry continue to remain sluggish. To put things in perspective, penetration levels of televisions in India is just 24% as compared with 98% in China, 11% in Brazil, 235% in France, 250% in Japan and 333% in US. Refrigerators also have good potential for growth in view of a meager 2% penetration levels. Infact, amongst all segment within the Indian consumer durable segment, penetration levels of TV is believed to the highest. This is applicable to other sectors as well. Though growth prospects are promising at the revenue level, whether this will percolate into higher profitability is a cause of concern. This is in light of high competition and price wars.
Increase in abatement on watches to 40% and reduction in customs duty on key raw materials. Exemption of excise duty on watches and clocks of retail price not exceeding Rs 500 per piece.
Excise duty on B&W TV set should be based on MRP with an abatement of 40%.
There should be customs duty differential between CTV, colour picture tube and colour glass parts to encourage value addition. Peak customs duty on raw materials lowered to 35% from 40%.
Excise duty on watches below Rs 500 per piece increased.
Excise duty on B&W TV increased to 8% from 4%.
Administered interest rates lowered by 50 basis points.
Hike in standard deduction, removal of surcharge and hike in section 80L benefits
Peak customs duty reduced to 25% from 30%.
Excise duty on air conditioners reduced by 8% from 32% to 24%
Penetration of durables continues to remain sluggish when compared to other developing economies. Rising income levels, consumption patterns and urbanization are some of the key factors that would result in higher growth in volumes in the long run. Easy availability of finance has stimulated consumers to buy durables. With the government focusing on rural electrification programme, the consumer electronic manufacturers stand to benefit over a period of time. Higher import duty on key raw materials (ex: colour picture tubes) has been a cause of concern. Exchange schemes and pricing-play by some manufacturers have had a negative impact on top players. Prices of durables and electronics have been on the decline over the last three years Volatile performance of the agricultural sector has had a negative impact on demand. The sector's performance is highly dependent on monsoon and reforms, which has failed often. Threats of cheaper imports from China and other South East Asian countries, both for electronics and watches. |
© Equitymaster Agora Research Private Limited. www.personalfn.com | www.equitymaster.com |
Why Personalfn? | Why Equitymaster? | Terms of Use | Contact Us | About Us |