Budget 2019: What consumer durables & smartphone industry expects from Modi govt

It is to wait and watch what else FM Arun Jaitley has in store for the country’s fastest growing market and of course its consumer base.

Electrification of rural India and the boost in rural income too has penetrated consumer durables in villages. (Image: PTI)

Budget 2019: As the sixth and the last budget of Bharatiya Janata Party (BJP)-led Central government is less than two weeks far and while the Finance Ministry has made every effort to ease the burden on the consumer durables and smartphones industry in the past years, it is to wait and watch what else FM Arun Jaitley has in store for the country’s fastest growing market and of course its consumer base. Budget 2018 bolstered rural development, which is the hotbed for consumer durable sales in India, only second to the working class on which the consumer durables industry depends largely. However, Budget 2018 did not bring much relief in terms of GST for the consumer durables sector, as most of the items still hovered in the peak slab rate of 28% and 18% GST. The Consumer Durables market is one of the fastest growing sectors in India and much of the onus lies in the rising disposable income of the middle class and easy credit facilities like zero-interest EMIs. The electrification of rural India and boost in rural income too has penetrated consumer durables like refrigerators, television sets, music systems, etc in villages and far-flung areas. The gigantic expansion of e-commerce marketplaces, sales offers and ease of shopping from home, has further impacted the consumer electronics market positively in India. The handhelds market too has seen a steep rise in sales, thanks to the competitive costs of mobile phones and all the more competitive mobile service charges. Sales of smartphones in India have grown drastically which has been majorly contributed by the telecom sector that has offered data rates that ensure affordable entertainment in the hands of low-income groups too as well as the growing craze for OTT platforms and social media. India claimed the spot of World's second largest Smartphone market wherein 40.1 million smartphones were shipped between a short span of 3 months from July to September 2018. Of late, further revision of Goods and Services Tax (GST) on consumer durables by the GST council is expected to spur revenues of the industry. In July 2018, the peak GST rate of 28% on a plethora of consumer durables like refrigerators, washing machine, small screen TV, storage water heaters, hair dryers, mixer grinder, vacuum cleaners, etc was brought down to 18% slab rate. Talking about revenues, the consumer electronics and appliances market grossed US$ 31.48 billion in 2017 and as per experts, the Indian electronics market is expected to grow by 41% CAGR from 2017 to 2020. The S&P BSE consumer durables index has paced at a rate of 20 CAGR between 2010-17. In the last GST Council meeting held on 22nd December 2018, the GST slab rate for monitors and televisions up to 32” screen size, digital cameras and video camera recorders, and video game consoles were pruned from 28% to 18%. The GST rate on power banks of lithium-ion batteries too was reduced from 28% to 18% giving a boost to the smartphone industry. Air conditioners, large screen TVs and dishwashers still linger on in the 28% luxury or sin tax GST Slab rate. While dishwashers in India can still be considered a luxury consumer durable; air conditioners are becoming a necessity in urban areas which are marred by scorching heat during summers due to deforestation leading to concrete jungles. It is highly expected from the Finance Minister to bring down the GST on ACs or come up with some other perks in the Budget 2019 to make way for the Air Conditioner manufacturer and consumers. On the other hand, tax exemptions on personal income tax if declared in Budget 2019 will also lead to more disposable income in the hands of individuals and the salaried class, which will boost the consumer durables and smartphones market. The Modi government has raised investor sentiment in the past and made 100% FDI possible via the automatic route in the electronics market. Further steps in this direction and ease of doing business will expand the consumer goods industry.