Consumer Durables

Introduction

Indian consumer durables market is broadly segregated into urban and rural markets and is attracting marketers from across the world. The sector comprises of a huge middle class, relatively large affluent class and a small economically disadvantaged class. Global corporations view India as one of the key markets from where future growth is likely to emerge. The growth in India’s consumer market would be primarily driven by a favorable population composition and increasing disposable income.

Per capita GDP of India is expected to reach US$ 3,273.85 in 2023 from US$ 1,983 in 2012. The maximum consumer spending is likely to occur in food, housing, consumer durables, and transport and communication sectors.

Investments

According to Department for Promotion of Industry and Internal Trade, during April 2000 – March 2020, FDI inflow into the electronics sector stood at US$ 2.79 billion.

Following are some recent investments and developments in the Indian consumer market sector.

  • Consumer durable loans in India increased 43% y-o-y to Rs 6,495 crore (US$ 921.4 million) in FY20.
  • In January 2020, Godrej appliances announced plans to foray into air-cooler segment and acquire a market share of 15% in the segment in the next five years.
  • In May 2020, Philips announced investment of Rs 250–300 crore (US$ 35.47–42.56 million) to boost its manufacturing and R&D facilities in India.
  • In December 2019, Kent RO Systems Ltd announced an investment of Rs 150 crore (US$ 21.46 million) to set up a new manufacturing unit over next three years.
  • In November 2019, Nokia entered in partnership with Flipkart to enter consumer durables market in India with plans to launch smart TVs.
  • In October 2019, Apple Inc. entered in an agreement with Maker Maxity mall, co-owned by Reliance Industries, to open its first company-owned iconic outlet in India.
  • In August 2019, Voltas Beko launched India’s first five star washing machine.
  • Micromax plans to invest US$ 89.25 million by 2020 for transforming itself into a consumer electronics company.
  • Haier announced an investment of Rs 3,000 crore (US$ 415.80 million) as it aims a two-fold increase in its revenue by 2020.
  • In June 2020, Thomson, a French-based television company, announced to invest Rs 1000 crore (US$ 141.6 million) over five years in India to strengthen its position in the Indian consumer electronic market.

Government Initiatives

  • In January 2020, the Bureau of Energy Efficiency (BEE) made it mandatory for all room air conditioners to have a default temperature of 24 degrees Celsius.
  • National Policy on Electronics Policy was passed by the Ministry of Electronics & Information Technology in February 2019.
  • A new Consumer Protection Bill has been approved by the Union Cabinet. Government of India will make the existing laws more effective with a broader scope.
  • The mobile phone industry in India expects that the Government of India’s boost to production of battery chargers will result in setting up 365 factories, thereby generating 800,000 jobs by 2025.
  • The Union Cabinet has approved incentives up to Rs 10,000 crore (US$ 1.47 billion) for investors by amending the M-SIPS scheme in order to further incentivise investment in the electronics sector, create employment and reduce dependence on import by 2020.
  • The Government of India has allowed 100% Foreign Direct Investment (FDI) under the automatic route in Electronics Systems Design and Manufacturing sector. FDI into single brand retail has been increased from 51% to 100%; the government is planning to hike FDI limit in multi-brand retail to 51%.
  • In September 2020, the Government of India planned to offer production-linked incentives worth Rs 1.68 trillion (US$ 23 billion) to companies such as consumer appliance, automobile and solar panel to attract companies to establish manufacturing plants in India.

Road Ahead

Indian appliance and consumer electronics (ACE) market is expected to increase at 9% CAGR to reach Rs 3.15 trillion (US$ 48.37 billion) in 2022. Demand growth is likely to accelerate with rising disposable income and easy access to credit. Increasing electrification of rural areas and wide usability of online sales would also aid growth in demand.

Note: Conversion rate used in April 2020, Rs 1 = US$ 0.013123

References: Media reports, press releases, Press Information Bureau (PIB), Union Budget 2019–20, Boston Consulting Group, International Data Corporation.