The government’s two key announcements on Monday are likely to benefit makers of mobile phones, household appliances and other small electronics ahead of the peak festive season as consumers could be drawn to purchase such items that typically draw GST of over 12%. The government on Monday offered a Rs10,000 special festival advance as well as an LTC cash voucher scheme directed towards stimulating consumer demand. There are around 3.5 million government employees likely to benefit from this scheme.
If availed by all, these schemes are expected to pump ₹36,000 crore worth of consumer spends through the LTC ( ₹28, 000 crore) and festival advance ( ₹8, 000 crore) schemes.
This comes at a time when the RBI has estimated the economy to contract by 9.5% in 2020-21 . According to research firm Care Ratings, during this year, though the economy hinges on the agriculture sector growth from supply side, the boost also needs to come from consumer demand side which has been hampered during the pandemic due to loss of jobs and pay cuts.
India is the midst of peak festive season and companies are pinning hopes on shoppers returning to their stores. However, the pandemic and the unrelated uncertainty has dented consumer confidence in the market.
The peak festive season usually witnesses significant sales for consumer goods companies. Consumers typically spend on buying apparel, mobile phones, household goods during this period that commences with Onam in south and ends with Diwali in October-November. This festive season, however, is expected to be sentimentally weak as covid cases continue to surge and consumers remain unsure about their future finances.
But such measures could help lift demand.
“Definitely the spending should increase—from both the Rs10,000 festive advance and the LTC cash voucher scheme, especially for our categories, in fact all our categories attract GST of 12% and above. This puts more money in the hands of consumers, it is a very positive move, said Nilesh Gupta, managing director at electronics retailer Vijay Sales that runs large format stores selling television sets, refrigerators, washing machines, laptops, etc. Gupta said the move is well timed ahead of the festive season and could aid the household electronics categories.
Consumers have had limited choice to spend on travel and entertainment over the last few months, said others as movement is still restricted. Any extra money in the hands of consumers is likely to benefit categories like electronics.
“There is a definite demand expected, as customer have really limited choice to spend on travel and other entertainment. So mostly customers will spend on durables specially on screens and appliances which will see a certain spike, said Avneet Singh Marwah, CEO, SPPL, that is the exclusive brand licensee of Thomson TVs in India.
Industry executives unanimously agreed that these schemes will push consumers to buy items which bring convenience by offering more liquidity to the customers for discretionary spends,
“We see an increase in demand for consumer durables and appliances that make every day living seamless, efficient and more comfortable for the consumers. We are optimistic that such initiatives by the government along with the push towards creating a robust infrastructure will further our economic recovery in the coming months,”said Anil Rai Gupta, CMD, Havells India Limited.
Kamal Nandi, President – CEAMA, and Business Head & EVP, Godrej Appliances said that consumers have appreciated the value appliances add to their lives.
“…as they are looking for comfort and convenience at home with the adoption of ‘work from home’ format and for the overall health, hygiene & safety of their family from the coronavirus. With this announcement adding to normal monsoon boosting agricultural output in rural markets and several firms reversing pay-cuts in urban areas, we expect the demand to propel and sustain over the next couple of months,” he added.-Live Mint