Skewed index cause of fall in consumer durable sale: Study

The output of consumer durables declined in January 2008 as also in the first 10 months of the current financial year even as industrial growth of the country slipped to 5.3 per cent in the first month of this calendar year, according to official figures released today.

The Index of Industrial Production (IIP) figures show that the output of the consumer durables sector declined 3.1 per cent this January against 5.3 per cent growth in the first month of last year.

In the April-Januray period, the production index dipped to 1.7 per cent, against 10.6 per cent growth in the year-ago period.

Industry experts attribute this to the wrong weight for certain goods in indices and increased imports of premium products.

For instance, the IIP includes slow-moving goods like black-and-white televisions, VCRs and tape recorders. This despite the fact that DVD players, set-top boxes and LCDs are witnessing a robust demand.

Industry players, however, feel the criteria for measuring the production index should be reviewed as the industry has been showing an overall healthy growth.

Suresh Khanna, secretary general, Consumer Electronics Manufacturers Association, said: "Consumer durables contribute more than 5.5 per cent to the production index but the basic criteria for measurement needs to be changed. Like the auto sector, the government must overhaul the sector considering the lower penetration level of these products."

Analysts say the discrepancy is also due to skewed classification as consumer durables also include automobiles. George Menezes, COO, Godrej Appliances, said the production index could be linked to the consumer demand as most premium products were imported.

"Sales of premium products like LCDs, front-load washing machines and frost-free refrigerators are showing a good performance. It is important to consider the sales growth to judge the sector's performance," he said.

However, industry insiders say manufacturing will pick up pace over the period as companies are setting up plants for premium products as well. Recently, Samsung began production of front-load washing machines in India.

Both Samsung and LG Electronics have started new facilities in Chennai and Pune, respectively, while Indian players like Mirc Electronics and Godrej have announced expansion plans for air-conditioners and washing machines.

Industrial growth, as measured by the Index of Industrial Production (IIP), has moderated to 8.7 per cent in the first 10 months of the current fiscal, against 11.2 per cent during the corresponding period of the previous fiscal, according to official figures released today.