New Delhi: Sales of consumer durables and appliances have declined around 40% since the government withdrew high-value banknotes on 9 November. The trend, according to industry executives, will continue until cash flow becomes normal.
Makers of consumer durables claim that they have seen a marginal uptick in the top towns in the past couple of weeks, but there has been no sign of sales picking up in tier-II towns and beyond, generally referred to as upcountry markets.
The market for consumer durables still operates 80% on cash. New schemes encouraging digital payments, special discount offers and promotions have not helped much.
“The industry is under stress. Business was down around 40% in November and the trend is almost the same even this month,” said Manish Sharma, president and chief executive officer for Panasonic India and South Asia and executive officer, Panasonic Corp.
Sharma is also the president of the Consumer Electronics and Appliances Manufacturers Association, a lobby group that has in a December 2016 study, projected the appliances and consumer electronics industry to reach Rs1.92 trillion by 2021 from Rs1.07 trillion in 2015.
“Initially, there was a big slump. Business was down around 40% in November. While there are signs of recovery in top towns, upcountry are still the same,” said Kamal Nandi, business head and executive vice-president, Godrej Appliances, a division of Godrej and Boyce Mfg. Co. Ltd.
Companies that were expecting a 30% growth on improved household income, backed by a good monsoon and the Seventh Pay Commission, are now expecting to settle at a maximum 15% growth for the full fiscal year if demand picks up next quarter.
“We lost two months. A 15% growth for the full year would be good for the industry,” Nandi said, adding that most of the firms, including Godrej Appliances, had cut production by around 15% in November after the government’s demonetisation decision.
According to Nandi, Godrej Appliances was aiming for a revenue of Rs3,750 crore for the fiscal year ended March 2017. “Now, we are aiming for something around Rs3,500- 3,600 crore,” he added.
Consumer durable companies may not report a huge drop during the full October-December quarter as most of the loss in November-December would be adjusted with the huge growth that the industry had in October backed by festive sales, Nandi added.