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Post-Budget Responses

Finance Minister, Nirmala Sitharaman presented The Union Budget of India for 2020–2021, on February 1, 2020.

Impact on the electronics sector specifically smartphones: India is one of the leading mobile phone manufacturers in the world with the big players like Samsung, Xiaomi, Oppo and Vivo already setting up their factories in India. As the latest budget focuses more on domestic manufacturing of mobile phones, it is expected to have a positive impact on exports and entry of newer players in the segment. It will also intensify the price competition which should benefit the consumers
Because of the low manufacturing cost advantage, India has the potential to become an export hub if the entire ecosystem (R&D, production, logistics, raw material, manpower) of manufacturing is developed. It will also encourage more international companies to make investments in India.

India is already one of the largest smartphone markets in the world by consumption seeing a growth of 9.1% (retail volume) in 2019 mainly due to aggressive pricing and marketing push by the Chinese players. Similar growth is expected in the next 5 years as well with feature phones using consumers upgrading to smartphones and smartphone using consumers upgrading to better, newer and often costlier phones (though replacement cycle has increased to almost 2 years now). The intense competition should make the pricing more competitive in sub 20K INR segment and facilitate upgrading.

As the manufacturing ecosystem develops more, local manufacturers are expected to enter the market too.’Anjali Jain, Senior Analyst at Euromonitor International

We welcome the amendment made by the government to boost domestic manufacturing and attract large investments in the electronics value chain. CEAMA is committed to promoting indigenous manufacturing of appliances and consumer electronics in the country and the announcements in this budget shall provide the necessary boost to the ‘Make in India’ initiative.

The scheme focused on encouraging the manufacture of mobile phones, electronic equipment and semi-conductor packaging will benefit the electronics industry at large. 

The duty increase on certain components like compressors and motors and in some cases on Finished Goods, will help to further develop the manufacturing eco system in the country in the long run and is aligned to the Make in India initiative. However, the move is expected to result in some price escalation in the short run, on products like Refrigerators, Air Conditioners, Coolers, Washing machines, Air Purifier and Chest Freezers.

Government’s continued attention towards skilling especially new-age skill sets such as AI, Robotics will help improve the quality and quantity of skilled labour – critical to industrial growth. Additionally, taking electricity to every household by promoting ‘smart metering’ will be a great step as it will result in a direct and positive impact on the consumer durables sector. Also, this would give consumers the freedom to choose the supplier and rate as per their requirements.

The rationalizing of personal income tax slabs can help in increasing the number of taxpayers and would also assist in increasing disposable income in the hands of consumers. This will equally benefit the domestic savings rate and consumption. The increase in the income available for discretionary spends will help boost the demand of consumer durables in India, particularly in the mass segments.

With respect to the Free Trade Agreement (FTA), the government’s move to incorporate a suitable provision in the customs Act will help boost domestic manufacturing in the long run.

CEAMA continues to advocate the lowering of GST on Air Conditioners and large screen Televisions to 18%, which continues to be in the highest tax slab of 28%. The offset will help in reducing the price pressure and spur demand for both Air Conditioner (Split and Window) and Television (above 32 inches), as both have a huge opportunity for volume growth.Kamal Nandi, President – CEAMA and Business Head & Executive Vice President – Godrej Appliances

―TVJ Bureau

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