Indian durables production dips

The production of consumer durables in India has continued to slide in the Index of Industrial Production for the month of April 2007.

The growth rates in consumer durables have dipped to 5.3 per cent in April this year from 7.4 per cent in April 2006, according to statistics released by the government's Central Statistical Organisation.

The production of consumer durables has been declining in the recent past despite a robust double-digit growth in the sector. In February 2007, for instance, durables grew at 1.1 per cent compared with 20 per cent for the same period last year.

According to Suresh Khanna, general secretary, Consumer Electronics and Appliances Manufacturers Association (CEAMA), "the writing is on the wall". Khanna claimed that a distortion in the government's policy is leading to a dip in production.

"Consumer durables is a heavily taxed sector. But in some regions such as Uttaranchal and Himachal Pradesh, the government has offered region-based exemptions. This is leading to a fragmentation in capacity," he said.

Khanna added that several regional manufacturers of televisions were also exposed to international competition because of the free trade agreements (FTAs) signed by the government with countries such as Thailand.

At present, 30 per cent of colour picture tubes used in making colour televisions, are imported. Three years back, the imports stood at 15 per cent. Sixty per cent of DVD players sold in India are imported as kits.

Apart from the high local taxes, industry experts point out that the burgeoning imports into the grey market are hurting domestic production as local players cannot match the prices of imported products.

According to an industry expert, "There is a lot of under-invoicing in imports that's affecting the competency of local players. A PCB for a TV set would normally cost $12 in the international market," he said.

But this is imported to India by declaring a value of $2. The government is losing close to $160 million every year in tax revenues because of under-declaration," he said.

Industry players pointed out that the trend would only increase. Already, 70 per cent of the global consumer electronics was being sourced from China, said an executive with a consumer durable multinational. Players such as Sony, Philips and Toshiba do not own production facilities in India, resulting in increasing imports.