Consumer durables sector may be hit by rupee rise, duty cut

Consumer durables sector may be hit by rupee rise, duty cut


New Delhi: The consumer durables industry fears the plan to make India a global sourcing hub could be hindered in the wake of a rising rupee and customs duty cut on finished products.

“Increase in the value of the rupee puts the industry at a disadvantage, especially companies like Samsung and LG which have invested heavily in India," Consumer Electronics and Appliances Manufacturing Association (CEAMA) secretary general Suresh Khanna told PTI.

He said Indian exports have become uncompetitive in the global market and this is obstructing plans of companies to make India their global sourcing hub.

“There are chances that the investment being made by export-oriented companies might go down resulting in loss of employment opportunities in the country," he said.

Khanna pointed out that the removal of additional 4% duty on imported finished products has put at a disadvantage the entire domestic industry as well as multinational companies which have invested in India heavily.

“As domestic manufacturing becomes costlier than importing, the industry is being hit from two sides because of the dollar going down against rupee and removal of additional duty on imports," he added.

Indian rupee is trading at a nine-year high against the dollar and has risen more than 10% in 2007, making imports cheaper but hurting exports. Besides, the government early this month withdrew the 4% special additional duty on imports of all goods covered under state-level Value Added Tax. This will make such goods, especially electronic items like computers and mobiles, cheaper.

The situation is prompting companies to revisit their export targets. Korean firm LG, which manufactures consumer electronics, appliances and IT products at its plant in Pune, may find it tough to meet export targets.

“LG was aiming at a 25-30% increase in export of consumer durables but the appreciating rupee might make efforts a little difficult... however, we have some back-up strategy in place for the same," LG India Head Exports Jatin Madan said.

He said the company had exported products to the tune of 175 million dollars last year and other companies with a major export target in mind would definitely have to rethink.

Echoing similar sentiments, a Samsung India spokesperson said the company was studying the appreciating rupee trend to decide on its strategy for export markets.

“Earlier when rupee had gained against dollar, we had to increase prices of our products in markets like Sri Lanka and Nepal," the spokesperson said.

Samsung manufactures consumer durables like TVs and refrigerators, including high-end products, in India for exporting to neighbouring countries.