India Ratings & Research (Ind-Ra) believes that the excise duty cut on consumer durables to 10% from 12% will not boost their demand. This is because high interest rates and high Consumer Price Index continue to plague the sector.
The 2% duty cut will result in a INR200-INR1000 reduction in the final prices from INR10,000-INR50,000 for consumer durables. Index of Industrial Production for the consumer durables industry declined 12.9% yoy during April-December 2013 as against 3.7% yoy in the same period last year. This is despite the Finance Ministry providing additional capital to the INR140bn announced in the FY14 Union Budget to banks to enable them to lend to borrowers in selected areas such as two wheelers, consumer durables etc.
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