The budget is a simple document that impacts the lives of all Indians. The budget can affect you directly - through tax cuts or regulatory changes - or indirectly - through a gradual change in the economy. This year, all eyes are on Nirmala Sitharaman’s 2nd Budget. With the economy in a slump, it remains to be seen if Budget 2020 will live up to expectations and help revitalise the economy.
If Budget 2019 was any indicator of what’s to come, then the Finance Minister’s team is on the right track. Although it didn’t completely pull the economy out of its slump, it did work wonders for certain sectors. As we eagerly await the budget of 2020, let’s look back at last year’s budget and how it turned things around for one particular industry - consumer electronics.
An onslaught of poor economic decisions, taken in 2017 and 2018, led to a slump in consumer electronics sales. Fortunately, the budget of 2019, with the right combination of incentives and reforms, managed to turn the tables on the falling sales.
As you can see in the given graph, by the number of products sold annually, the consumer electronics market in India has seen a rising graph in the past few years. Further, experts deem the growth sustainable because of the extremely low penetration rates. A recent IBEF report noted the “huge untapped market” of consumer electronics in India.
And yet, despite these positive long-term trends, the sector has experienced significant fluctuation in the recent past. The consumer electronics market took a bad hit due to demonetization. Sales dropped by as much as 40% in November and December of 2016. “We lost two months,” an Executive VP of Godrej Appliances said on the record.
Next year, due to the rollout of the Goods and Services Tax, the consumer electronics market witnessed a further slowdown in sales. For four consecutive quarters, growth was in single digits - and in one quarter, was flat.
With the budget of 2019, however, the government introduced a range of effective interventions that boosted the sale of consumer electronics. Below are a few of the most effective steps taken in the budget of 2019:
Lower GST brackets
Ever since the introduction of the Goods and Services Tax, the government has gradually moved consumer electronic items from the 28% bracket to the 18% bracket. A PWC Report has noted that the 28% bracket had about 200 items at one point, and the current number is less than 35. The July budget of 2019 carried this forward. Items like juicers, mixers and digital cameras were put in the 18% tax bracket.
Tax cuts for the middle class
Individuals with income up to 5 lacs can claim rebates and have zero tax liabilities after the July budget of 2019. This increases the disposable income of millions of Indians. With more money in their hands, Indians can spend on consumer electronics for their convenience and luxury.
Rural electrification
Rural electrification is directly correlated with the purchase and use of consumer electronic items. The point above illuminated the relationship between disposable income and the demand for consumer electronics. But that is only half the picture. Home appliances like refrigerators and washing machines need a reliable power supply - a rarity in most of rural India. The government is trying to change that with MUDRA loans and schemes like Pradhan Mantri Awas Yojana – Gramin (PMAY-G). Dependable electric supply will stir up demand for consumer electronic goods in rural India.
Decreased tax on raw materials
The upfront cost of procuring raw materials impacts the final selling price of any product, and thereby it's demand. The budget of 2019 lowered the tax on lithium-ion batteries and other raw materials that go into manufacturing electronic goods to zero. This enables the industry to lower their selling price and attract more customers.
Goal of 1 lakh digital villages
Some long-term goals were also announced in the earlier February budget. The government expressed intent to bring digital technologies and consumer electronics to over 1 lakh villages across the length and breadth of India. This should spur on the electronics industry into newer markets.
Electric vehicles making inroads into India
The federal government also announced a slew of measures to boost both the production and sale of electric vehicles. With an increasing consumer interest in sustainable transport options, consumer electronic producers are sitting atop a mine of untapped revenue and market expansion.
All of these steps had a clear impact on actual sales numbers. Diwali sales in 2019 registered a 12% jump - much more than the flat rate of growth in the Diwali season of 2018. The head of LG home appliances also noted that their refrigerator and AC sales in 2019 were 30% more than their sales in the same categories in 2018.
Conclusion
The electronics industry introduces new products every year to make our lives more comfortable and efficient. Moreover, the advent of digitization, continual innovation and affordable payment options has further contributed to the rise and rise of the consumer durables sector. One such payment solution is Equated Monthly Instalments (EMIs).
On the Bajaj Finserv EMI store, you can avail all your favourite consumer electronics from the top brands in India at affordable EMI options. With brands like Samsung, Sony, Redmi, HP and more offering exclusive discounts and never-seen-before deals, you can take your pick of the litter. Whether you are buying a more power-efficient AC or the latest smartphone, Bajaj Finserv EMI Store offers the widest options, best discounts, and the smoothest shopping experience. Visit the Bajaj EMI store today - take in the full glory of consumer electronics and enjoy the dual advantages of modern technology and the convenience of Easy Monthly Installments.
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