Consumer durables growth plunges

Written by Neha Pal | Neha Pal | New Delhi | Updated: Aug 14 2011, 02:51am hrs
Growth in consumer durables output fell sharply to 1% from 21.2% a year ago in the IIP data for the month of June which signals the slowdown in the sector. According to companies like LG, Panasonic and Videocon, the demand for consumer durables such as air-conditioners, televisions, refrigerators has gone down in the last two to three months. Manish Sharma, director marketing, Panasonic India told FE, The R35,000-crore consumer durables industry is witnessing a slump in demand for consumer items such as LCDs, ACs and washing machines and the hike in policy rates has further aggravated the situation.

Experts are of the view that high interest rates weigh heavily on the consumers who seem to have had to re-look at money management priorities. Inflation has continued for several months and the impact has started coming down to non-essential items. This is a time when consumers are cutting their demand for essential items like gas and electricity, leave aside the consumer-durable items like AC, washing machines, said Gaurav Gupta, director, Deloitte.

According to industry figures, the growth of LCD segment which was expected to grow by 75-80%, is now growing at 50-55% and the hike in interest rates will further pull the numbers down. Air-conditioners, which were expected to register a growth of 30-35%, are growing only by 15-17% which will again get effected.

The industry has been suffering due to hike in metal prices with the increase in copper at 45%, steel 16%, resins 18% and aluminium 23% over August last year.

According to Rajiv Kumar, secretary general, Ficci,It may be noted that consumer durables demand during April to June 2011 was at 3.3% compared with 19.7% in the same period of the previous year. This surely reflects a downturn in consumer demand on the back of a higher interest rate regime.

Mahesh Vishnu, VP, home appliances, Samsung told FE, The inflationary pressures and rising interest rates are going to impact the consumer sentiments and its going to put a pressure on the buying power of the consumers.

Pinakiranjan Mishra, national leader, retail and consumer products, Ernst & Young said, Inflation has continued for several months and the impact has started coming down to non-essential items. This could be largely due to the reduced amount of spare cash and with rising prices of essential items. With the hike in prices of commodities, many consumer durable companies had hiked the prices of their products.