 Budget 2006-07: Consumer Durables
As we step into a new era of younger population mix increasing and per-capita income growing at a faster rate in light of the growing contribution of the services sector to the GDP, demand prospects are promising. But will players be able to sustain profitability with threat from imports growing day-by-day? Read more
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"The time is ripe to make India a preferred destination for the manufacture of semi-conductors and other high technology IT products including Wafer; Assemble, Test and Manufacture of Semi-conductors; Flat LCD/OLED/Plasma Panel Displays; and Storage Devices. To achieve this goal the Ministry of Information Technology will announce a policy shortly." |
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Excise duty on gold concentrates for refining, has been exempted. |
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Customs duty on MP3 and MPEG4 players has been reduced from 15% to 5%. |
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Excise duty is being exempted on dust and scrap of natural and synthetic precious or semi-precious stones; waste and scrap of precious metals or metals clad with precious metals arising in course of manufacture of goods. |
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Peak rate of customs duty reduced from 15% to 12.5%. |
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The impact of these budget measures is likely to be minimal for consumer durable players. In fact, the reduction in customs duty is likely to accentuate problems for the sector, as imports will be cheaper. The sector has to primarily rely on higher GDP growth prospects for volumes, as prices are likely to tumble further. |
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There are few positive measures for jewellery for the jewellery manufacturers. But the extent of the benefit is not ascertainable currently. We will keep you posted. |
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Despite the India Story on firm ground, the sector has been an under-performer on the stock markets, as operating and net margins continue to shrink. While we expect volumes to gain momentum, given that organised retailing is taking shape, the question is about profitability. While we remain neutral on consumer durable companies, we are positive on organised jewellery players like Titan (fundamentally speaking). |
| Budget 2002-03 |
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Budget 2003-04 |
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Budget 2004-05 |
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Thrust in rural electrification and road connectivity.
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.
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Significant thrust on infrastructure development and continuation of rural electrification projects 04
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%
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Excise duty on clocks, watches of retail sales prices upto Rs 500 per piece is being raised from 8% and 16%. Parts of clocks, watches of retail price upto Rs 500 per piece will now be liable to tariff with an effective tax rate of 16%.
Excise duty on monochrome television has been raised from 8% to 16%. CTV will attract a uniform excise duty of 16%.
Excise duty on imitation jewellery has been raised from 8% to 16%.
Increased spending on infrastructure and maintaining economic growth momentum from a long-term perspective.
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[Read more on Budget 2004-05] |
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| Key Positives |
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| Yet to catch up: Penetration of durables continues to remain sluggish when compared to other developing economies.
| The India story: 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.
| Better affordability: Easy availability of finance has stimulated consumers to buy durables.
| Rural unexploited: With the government focusing on rural electrification programme, the consumer electronic manufacturers stand to benefit over a period of time. But this has been slow to come by.
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| Key Negatives |
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| Mismatch in duties: Higher import duty on key raw materials (ex: colour picture tubes) has been a cause of concern.
| Fiercely competitive: 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
| Growth is slow: 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.
| Imports Vs Indian: Threats of cheaper imports from China and other South East Asian countries, both for electronics and watches.
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| Sector Performance |
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| COMPANY |
PRICE (Rs) |
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| BPL LIMITED |
28.0
(-7.6%) |
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