FTAs, inverted tax structure are unfavourable proponents for Make in India's success: Consumer durable body

Says lack of enough raw material and components, too, are major hindrances

The Consumer Electronics and Appliances Manufacturers’ Association (CEAMA) has said free trade agreements with major electronics goods manufacturing countries like Japan, South Korea and Thailand, costly credit, and lack of raw material and components are hindrances for Prime Minister Narendra Modi’s Make in India campaign.

The consumer durables industry is grappling with low rural demand and fierce competition. Since 2013, unseasonal rain and low spending on employment have pulled down rural demand. Experts said slow increases in minimum support prices for crops had reduced the real income of rural households. Last month, the CEAMA urged the commerce and industry ministry to revise the tax structure that favoured imports. Finance Minister Arun Jaitley reduced the excise duty on electronic components from 5 per cent to 2.5 per cent in this year’s budget.

The CEAMA also wants the goods and services tax rate for the industry below 20 per cent rate, against current proposals that have set it at 26 per cent. “The cost of production in India is higher than in China and other Southeast Asian countries. The lower cost of imported products due to free trade agreements has led to a downfall of indigenous manufacturing,” said Manish Sharma, president of the CEAMA and managing director of Panasonic India and South Asia.

“A complex duty structure and infrastructure continue to pose challenges in establishment of local industrial estates,” he added. According to Sharma, the government needs to promote the industry by reducing the cost of finance by 50 per cent.

“It will make the entire value cheaper by 20-25 per cent, helping high value-added manufacturing to sustain even in a zero customs duty environment,” Sharma said.

The CEAMA is trying to bring to the government’s attention the low penetration of home appliances in the country. Around 50 per cent of the rural population own televisions, 8 per cent own refrigerators, 1 per cent own washing machines, and the penetration of air conditioners is nearly zero.

The CEAMA estimates the Indian market for consumer electronics and appliances to reach $20.6 billion by 2020, growing at 13.4 per cent between 2014 and 2020. Between 2010 and 2014, the industry grew at 9.7 per cent to reach $9.7 billion.