The Indian government seems to be hell-bent on setting the economic clock back. Prompted by the pandemic-led supply chain disruption as well as the border skirmishes with China, it has begun to look inwards. The recent announcement of import restrictions on CTV sets is beckoning the license raj. TV makers will now seek licences from DGFT to import large-screen, premium models. The existing FTAs will be re-examined, to ensure that China does not divert its supplies to India via these countries.
We seem to have forgotten the 1951–1981 experience, when import substitution led to an annual growth of 3.5 percent and to inefficiencies, intense lobbying and ample opportunity for corruption. MeitY expects miracles from its Rs.50000 crore electronics manufacturing schemes, which so far have generated interest either from phone manufacturers, PCB makers or the passive components industry. The Economic Survey 2019–20 has also documented that the government’s plans to make India a hub for high-end, large electronics equipment and semiconductor units have hit a roadblock as most global companies opted to assemble rather than set up manufacturing units. The industry cannot so easily dismiss the huge investments once made, for instance, by Samtel, JCT and Hotline. The question cannot be of import substitution or export promotion, but, rather, how to raise the productivity of the economy.
Shifting gears, after a near wipe-out in April, and an insipid May, demand seemed to somewhat recover in June and July. As people adjusted to work-from-home, there was upgradation to large-screen TVs, larger washing machines, and interest in new segments as dishwashers, albeit a marked shift toward lower-priced brands. While refrigerator sales were impacted, ACs have lost out completely this year. Brands are working around product positioning across price points to cater to rural, tier 2 and tier-3 cities, as the large urban cities reel under the virus. In the backdrop of a contracting per capita income, and a worsening income inequality, at best, the industry can expect to match last year’s sales level. With the Reliance group now having shifted its attention to the retail sector, offline retailers already disgruntled with e-commerce platforms can expect to see profound implications on the competitive landscape. It is not yet time to take the foot off the pedal. The dealer fraternity needs to continue to reinvent the business for as long as it takes!