By Manish Sharma
‘Make in India’ story is evident with the consumer durables industry. The companies have already invested around Rs 7,000 crore in the past few years, according to the Frost & Sullivan 2019 report. The growing middle class and a youth-driven economy is likely to further increase the penetration of white goods in local households and have the potential to open up 150,000 additional jobs by 2024-25.
With this backdrop, we believe that the consumer durables and electronics industry has the potential to help our economy move faster towards the $5 trillion target. And, our expectation from the Union Budget 2020 is to see reforms that drive consumption and improve consumer demand. The decision to exempt basic custom duty on open cells from 5% to 0% was a welcome move last year and allowed us to pass on the benefits to the consumers by a reduction in TV prices. Such initiatives with phased manufacturing programs are helpful. However, the consumer appliances industry witnessed a flat growth over the last two years, and we urge the government to continue in the trajectory of positive policies to lend support and drive growth in the sector.
To give you a perspective – product categories like air conditioners, refrigerators, washing machines, television (TV) and audio, have gradually moved from luxury items to necessity in urban India- the overall market size is Rs 76,400 crore, according to the study, and the market is estimated to grow at a CAGR of 11.7 per cent till FY25 on the back of India’s consumption story. In fact refrigerators and TVs are turning into necessity products even in rural India. So a reduction in GST for TV and refrigerators will help reduce costs for you and drive further penetration of these products.
We believe strategic efforts must be put under the aegis of National Policy on Electronics (NPE) which will not only help boost the Make-in-India vision but also, help India become the hub for electronics manufacturing. To improve India’s export performance and letting outwards shipments drive growth for the country, it is essential for the government to incentivize local firms and establish an ecosystem for domestic manufacturing while also establishing beneficial trade agreements with consumption economies to push exports. In order to realise the ‘Make in India’ vision, it is essential for the government to reduce basic customs duty on parts used in the manufacturing of key components such as Motors and PCB which currently ranges from 7.5%-10%. To give a perspective, reduction in customs duty on these parts, used in the manufacture of PCB and motors which are further used for manufacturing Washing Machine, Refrigerator and AC will reduce input cost, allowing Indian manufacturers to be far more competitive.
Coming to imports, we would urge the Government to expedite the process of introducing BIS standards ensuring safety and quality to stop the import of low-quality products into the market. While standards have been defined for a number of consumer electronic products, it is still pending for crucial ones like air purifier, rice-cooker, induction stove, vacuum cleaners, pressure cooker, water purifiers to name a few.
Under the current Merchandise Exports from India Scheme (MEIS) policy, export incentives are pegged at 2%. We are delighted that the Government has been in discussions with us on the new policy – Remission of Duties or Taxes on Export Products (RoDTEP). We are hoping for better incentives under this to promote the whole ‘Make in India’ concept for exports. After all, ‘Make in India’ is not just ‘Make for India’ but for other markets too.
On the tax side, the industry breathed a sigh of relief when corporate tax rates were cut last year. Similarly, we urge the government to simplify the income tax regime through the introduction of direct tax code as it will help facilitate compliance. We also recommend abolishment of dividend distribution tax and replaced with TDS at a lower rate. The SEZ benefit which is expiring in Mar ’20 should be extended to propel the ‘Make in India’ narrative. Consumers, on the other hand, can benefit significantly if there’s a reduction in the personal income tax rate.
(The author is the President and CEO of Panasonic India and South Asia)