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Budget impact: TV sales may drop
July 12, 2004 15:55 IST
The television market in the country may see negative growth this year with "deteriorating" demand conditions following cyclical pressures as well as two per cent education cess which will hit the disposable income of consumers and also push up the prices of colour TVs due to higher duties, according to a study.
In a post-Budget analysis, ICRA termed the impact of the Budget on the television market as "negative."
"The imposition of education cess of two per cent may have the effect of decreasing disposable income with consumers," the study said.
ICRA said the cyclical nature of the television market would also impact the sales. "Following significant demand expansion during 2002-03 caused by sporting events, demand in growth during 2004 is expected to be moderate," it said.
The study said that colour TVs -- the largest sub-segment of the consumer durables market -- may see prices go up as a result of increase in raw materials costs and increase in excise duties.
"The increase in effective customs duty on colour picture tubes (CPTs) is also likely to result in price increases by domestic CPT manufacturers (who usually benchmark their prices against landed costs of imports)," ICRA said.
Overall, the increase in effective customs duty on finished items of consumer durables is unlikely to affect the domestic industry in a major way because a substantial chunk of the industry's products is manufactured in India, it said.
"The key price hikes are likely to occur in high-end models that are primarily imported. Increase in effective excise duties across all segments is likely to cause a marginal increase in prices of consumer durables," the ICRA study said, adding that tough conditions may force companies to absorb the increased costs so as to not depress demand.
"This may impact profitability (of the companies)," it said.
ICRA also said the doubling of duty on black and white television and populated printed circuit boards to 16 per cent would further hit their slackening sales. "The increase in excise duty is likely to cause an increase in B&W TV prices, reduce their price advantage vis-a-vis colour TVs, and accelerate the significant demand substitution in favour of
"The imposition of 16 per cent duty on populated printed boards for B&W TVs is also expected to hasten the decline of the already-shrinking B&W TV market," the study said.