Consumer goods firms expect bumper sales in new year

The govt increased the customs duty on internationally-manufactured television sets and set-top boxes to 20%

The Indian consumer durables industry is expecting bumper sales in 2018 because of dual impact of an increase in customs duty on imported consumer goods and the roll-out of the goods and services tax (GST), which has reduced their costs substantially.

On December 15, the government increased the customs duty on internationally-manufactured television sets and set-top boxes to 20 per cent. While these have necessitated a price rise from global players like Apple, who manufacture goods abroad, it has also given a massive fillip to domestic makers such as LG, Samsung, Videocon, and Dixon who are encouraged to expand capacity under the ‘Make-in-India’ initiative.

“We are mobilising our sales and marketing initiatives in 2018 as we are expecting the tide to turn from next year. The worst is now behind us. This is coming after almost three years of low capacity utilisation,” said a top industry official. “The ill-effects of demonetisation is also contained in 2017,” he said. 

According to the IIP figures for October, consumer durables firms reported a negative growth for the second consecutive month at negative 6.9 per cent reflecting the lacklustre festive demand and overall weakness in demand in the economy.

Rating firm CRISIL said due to the roll-out of the GST, the warehousing cost of the consumer product companies would reduce by up to 50 per cent. The number of warehouse for consumer durables firms would come down to 10-12 from 25-30, spread across the country, CRISIL said. This would be an added advantage for LG, Samsung and Videocon to revive their sales.

According to Morgan Stanley, a recovery in private capex will be under way in 2018, for the first time in six years as aggregate demand is improving that will lift the capacity utilisation.

“Corporate balance sheet fundamentals are improving. State-owned banks will be recapitalised, which will improve the overall banking system’s ability to meet investment credit demand,” said an analyst of Morgan Stanley.