Policy shocks stunt growth in electronics sector

Rujuta Parekh
Sunday, 8 October 2017

Pune: With hiked taxation on white goods under the newly implemented Goods and Services Tax (GST), the electronics sector has failed to meet the expected growth levels in the first half (H1) of the current Financial Year (FY). While the sector was just recovering from the aftershocks of demonetisation, GST further stunted the growth. 

While the sales of white goods like TV, refrigerator, AC and the likes were affected, the sales of mobile phones showed no change. 

Pune: With hiked taxation on white goods under the newly implemented Goods and Services Tax (GST), the electronics sector has failed to meet the expected growth levels in the first half (H1) of the current Financial Year (FY). While the sector was just recovering from the aftershocks of demonetisation, GST further stunted the growth. 

While the sales of white goods like TV, refrigerator, AC and the likes were affected, the sales of mobile phones showed no change. 

Speaking on the performance of his company in this period, Business Head and Executive Vice President, Godrej Appliances, Kamal Nandi said, “The summer was good during which we recorded a growth rate higher than that of the industry in the months of April and May. The ambiguity surrounding the implementation of the revised tax regime resulted in an exponential spurt in sales in the month of June followed by a slump in the month of July. We have thus bounced back in the months of August and September. Though we have grown in the first half of the year, our growth rate has not been as we had expected.” 

With regards to the sector, Nandi said that despite the events of demonetisation and GST, the home appliance industry has seen a growth, though marginal, in the first half of this financial year. “In November last year, we saw the event of demonetisation which had a considerable impact on the consumer durable industry. The industry de-grew by 40 per cent in November, 15 per cent in December and in January by 3 per cent,” Nandi said. 

He said, “With the nuances surrounding the GST implementation being unclear even after July 1, trade partners were focusing on de-stocking of their existing stocks. However, they had begun re-stocking again towards the end of the first half to prepare for the festive season where customers are expected to step into the markets to make the most of the festive offers.” 

According to him, the newly announced Saubhagya Yojana electrification project will help increase the penetration of appliances in India, which is, at the moment, extremely low in the rural areas. “Furthermore, due to the ambiguity surrounding the impact of GST implementation earlier this year, we are of the view that consumers perhaps postponed their purchases for the ongoing festive period to enjoy the benefits of the lucrative offers, the results of which we will see in the second half of the financial year. Good monsoons, with a total seasonal rainfall of 95 per cent of LPA (long period average), and the implementation of 7th Pay Commission for Central government employees will definitely have a positive effect on the consumer durables market thereby leading to more growth during the festival season. The good monsoons will increase agricultural output thereby increasing the demand in the rural areas. The hike in the HRA for the Central government employees will increase their disposable income, propelling demand for consumer goods. E-commerce players have also revised their strategy and are now chasing profitability and not just traction,” he explained. 

Mobile business going strong 
- Mobile companies have only shown profits and high demand for most of their newly-launched smartphone handsets hinting at the fact that this segment has not seen much of an impact of the recent government policies. 
- While speaking in the city recently, highly placed officials from Samsung stated that their recently launched Samsung Galaxy Note 8 has received a phenomenal response with record-breaking numbers in terms of pre-bookings. 
 

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