As we see it, India's per capita penetration of white goods remains dismal. Availability of easy financing options, increased competition resulting in falling prices and reduction in customs duty has been boosting retail sales. The rising rate of growth of GDP, rising purchasing power of people with higher propensity to consume with preference for sophisticated brands would provide constant impetus to growth of white goods industry segment. Penetration of consumer durables would be deeper in rural India if banks and financial institutions come out with liberal incentive schemes for the white goods industry segment.
-----------------------------------------------------------------------------------------------------------------------------

Industry Wish List

FICCI's wishlist

CST should be made VATable, as has been done in the case of Additional Customs Duty, which has been imposed on imports.  This will provide a level playing field to the indigenous industry vis-a-vis imports.

Government should direct NABARD to advance loans to villagers for purchase of television sets and consumer durables.

IT and non-IT products (consumer electronics/entertainment) should be treated at par with regards to indirect taxes.

Some of the consumer electronic products have been included in the Early Harvest Scheme of Thailand FTA.  These products include colour TV, colour picture tubes (CPT), air conditioners & refrigerators. Customs duty on these products imported from Thailand is 0%.  It has resulted in incidence of inverted duty.  With the customs duty becoming 0%, there has been spurt in import of these products from Thailand. While colour TV set can be imported from Thailand at 0%, its many inputs attract customs duty of 10%.  To rectify the situation, the customs duties on inputs should not be higher than customs duty on finished products.

Raw material should have the minimum customs duty, a component should have intermediate duty and finished product should attract peak rate of duty. It is suggested that customs duty on raw material should be 0%, on components 5% and finished product 10%.

Customs duty on basic raw material such as plastic, aluminum, copper, steel, lead and zinc needs to be lowered. Since these materials are used in the manufacturing, high customs duty makes the Indian products globally non-competitive. The customs duty on these basic raw materials should be brought down to 0%.

Customs duty should be 'zero' on all capital goods required by the electronic hardware manufacturing units, on actual user condition.

Imports should be brought under VAT net, to provide level playing field to indigenous manufacturers.

Parts and sub assemblies of LCD TV should be levied nil customs duties.

Excise duty on all consumer electronic products including components, raw materials for components and capital goods for electronic industry should be rationalized to 8%.

-----------------------------------------------------------------------------------------------------------------------------

Budget over the years

Budget 2005-2006

Excise duty on clocks, watches of retail sales prices upto Rs 500 per piece is being raised from 8% and 16%. Parts of clocks, watches of retail price upto Rs 500 per piece will now be liable to tariff with an effective tax rate of 16%.

Excise duty on monochrome television has been raised from 8% to 16%. CTV will attract a uniform excise duty of 16%.

Excise duty on imitation jewellery has been raised from 8% to 16%.

Increased spending on infrastructure and maintaining economic growth momentum from a long-term perspective.

Budget 2006-2007

Excise duty has been imposed @ 2% on articles of jewellery on which a brand name or trade name is indelibly affixed or embossed on the articles of jewellery itself. Unbranded articles of jewellery and other articles of precious metals will continue to be exempt from duty. Imitation jewellery to attract lower excise duty of 8% as compared to 16% earlier.

Excise duty on air conditioners is being reduced from 24% to 16%. Consequently, abatement from retail sale price is also being reduced from 35% to 30%.

Peak customs duty reduced from 20% to 15%.

The new income tax brackets, the change in exemption and deductions available to individuals and the increase in exemption for women.

Budget 2007-2008

Hike in allocation towards rural development and increased spread of employment guarantee scheme (to spur demand for consumer durables in the rural areas).

Dividend distribution tax to be hiked from 12.5% to 15%.

Additional education cess of 1% to fund secondary and higher education.

-----------------------------------------------------------------------------------------------------------------------------

Key Positives

Yet to catch up: Penetration of durables continues to remain sluggish when compared to other developing economies.

The India story: Rising income levels, consumption patterns and urbanisation are some of the key factors that would result in higher growth in volumes in the long run.

Better affordability: Easy availability of finance has stimulated consumers to buy durables.

Rural unexploited: With the government focusing on rural electrification programme, the consumer electronic manufacturers stand to benefit over a period of time. But this has been slow to come by.

Key Negatives

Mismatch in duties: Higher import duty on key raw materials (like colour picture tubes) has been a cause of concern.

Fiercely competitive: Exchange schemes and pricing-play by some manufacturers have had a negative impact on top players. Prices of durables and electronics have been on the decline over the last three years

Growth is slow: Volatile performance of the agricultural sector has had a negative impact on demand. The sector's performance is highly dependent on monsoon and reforms, which has failed often.