Consumer durables in IIP down 4% in FY23 compared to pre-covid FY20

Segment falls 12% in FY23 over that in FY19 due to muted demand

The recently released index of industrial production (IIP) data showed that consumer goods, particularly durables, performed poorly in 2022-23 year-on-year. The performance of consumer durables becomes worse if one compares their output in FY23 to that of pre-Covid years.

Though the output index of consumer durables was up just 0.5 per cent in 2022-23 compared to 3.2 per cent in the previous year, it contracted almost four per cent compared to the pre-Covid year of 2019-20.

This was despite the fact that consumer durables had declined 8.7 per cent in 2019-20. If we go back a year earlier, consumer durables production fell 12 per cent in 2022-23 over 2018-19.

Consumer durables declined in seven months during 2022-23.

This is not the story of other segments as IIP rose 5.1 per cent in 2022-23 against 11.4 per cent in the previous year. It was up 7.2 per cent compared to 2019-20 and 6.3 per cent over 2018-29.

Manufacturing, a broad sector to which consumer durables belong to, rose 4.5 per cent in 2022-23 against 11.8 per cent in the previous year. It was up 5.6 per cent in 2022-23 compared to 2019-20 and 4.1 per cent compared to 2018-19.  

The dismal state of consumer durables can be attributed to muted demand due to high inflation and loss of income during the Covid times. The recent deceleration in inflation may have a lag effect, if the trend continues.

For instance, automobile production rose 12.55 per cent at 25.9 million in 2022-23 over 23 million in the previous year. However, the production was 1.6 per cent lower compared to that in 2019-20 and 16.1 per cent compared to 2018-19, according to figures provided by Society for Indian Automobile Manufacturers (SIAM).

It should be noted that SIAM figures are current, while IIP is an index with the base year of 2012. As such they are not strictly comparable but give a broad indication.

If one takes the segment—manufacture of motor vehicles, trailers and semi-trailers--into account in IIP, the story remains the same with some minor changes. This segment grew 19.2 per cent in 2022-23 against 18.1 per cent in the previous year. The production index of this segment was also up 14 per cent compared to 2019-20. But this happened because 2019-20 saw a massive decline of 18.5 per cent in this segment. The output index of this segment fell almost seven per cent in 2022-23 compared to 2018-19.

Bank of Baroda chief economist Madan Sabnavis said the production of consumer durables remains low key mainly on account of demand conditions. 

"High inflation combined with lower growth in income has come in the way of demand. This includes rural demand which has not been up to the mark," he said.. 

Durables in the premium category have however done well especially when we consider automobiles, Sabnavis pointed out. 

"But otherwise demand has been lacklustre. Households have been paying higher prices for all goods and services due to inflation and hence have less set aside for discretionary spending," he added.

The story of consumer non-durables is not as depressing as consumer durables, but there is nothing much to talk about them too. This segment, also known as fast moving consumer goods (FMCG), rose 0.5 per cent in IIP during 2022-23 against 3.2 per cent in the previous year. It was up 1.4 per cent compared to that in 2019-20 and 1.3 per cent in 2018-19.

This may be because demand elasticity for FMCG is not as high as for consumer durables. Even then, demand remained subdued for consumer non-durables too.