New Delhi: India’s appliance and consumer electronics sector is set to grow at a compound annual rate of 13.4%, to touch $20.6 billion by 2020, global consulting firm EY said in a report released on Friday.

The market was worth $9.7 billion in 2014, it said, adding that the annual growth rate was 9.7%.

Within consumer electronics, set-top boxes are seen as the fastest growing category, at 28.8% year-on-year, primarily because of the government’s digitization initiative, according to the report that was released jointly by EY and Consumer Electronics and Appliances Manufacturers Association (CEAMA).

From just 18.4 million units in 2012, the set-top box category will reach 39.4 million in 2015, while there will be about 45 million units of replacements over the next four years as the country gets digitized.

The television category is projected to grow at 20% year-on-year between 2014 and 2020, followed by refrigerators at 10%, washing machines at 8-9% and air-conditioners at around 6-7%.

The growth in the coming years, EY said, is expected to be driven by the “rural market, as the government increases its focus on rural electrification".

Speaking at the CEAMA event, where the report was released, Amitabh Kant, secretary, Department of Industrial Policy and Promotion (DIPP), said the government’s aim is to make India the preferred manufacturing destination over the next decade. “There is a need to increase domestic manufacturing in the sector of electronics, as this segment has been contributing to the current account deficit of the country. China is becoming expensive and India now has the opportunity to make it as the preferred manufacturing destination. If we can’t do it now, we’ll never be able to do it," added Kant.

In reality, the manufacture of consumer electronics and appliances in India is insignificant. Most components are imported. “Even today, key components are imported, although the level of localization has increased in assembling in India in the last few years," said Manish Sharma, president, CEAMA and managing director, Panasonic India and South Asia. Around 60-70% of inputs in major appliances are imported due to the low supply base in India.

According to the EY report, the present level of localization for televisions is just about 25-30% as panels, semiconductors and even the glass required for manufacturing LCD/LED TVs is imported.

In air-conditioners, localization is around 30-40% as the key component, the compressor, apart from other parts like refrigerant, motor and coil are imported.

Only about 35-40% of components for set-top boxes are sourced here.

The localization level for washing machines and refrigerators is higher, at about 70%.

In the report, CEAMA members such as Panasonic India, Samsung India, LG Electronics, Whirlpool India Ltd, Godrej Appliances, among others, blamed free trade, especially with the Association of Southeast asian Nations, the inverted tax structure and lack of government support for the surge in imports.

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