Economics Project on

General Management and

Economics Aspect of the
FMCD Sector in India

Presented by:
Manasvi Bansal (5)
Pratiksha Dhakate (11)
Sanket Joshi (17)
Siddhesh Godbole (23)
Nitin Mehta (29)
Viraj Raut (35)
Foram Shah (41)
Harshid Shinde (47)
Priyanka Talreja (53)
Rishav Raj (59)

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 INDEX
1. Introduction of FMCD Sector………………………………………………………………3

2. Major players in the sector………………………………………………………………….4

3. Barriers in the growth of the industry…………………………..…………………………..5

4. Emerging trends in India………………………………………...………………………….6

5. Government policies……………………………………………….………………………..7

6. Market Size and Growth rate………………………………………………………………..8

7. Growth Drivers………………………………………………………...……………………9

8. CSR Activities in FMCD Sector…………………………………………………………..10

9. Economic Factors affecting FMCD Sector………………………………………………..11

9.1 SWOT Analysis…………………………………………………….…………………..11

9.2 Impact of Interest Rates on FMCD Sector…………………………..…………………12

9.3 Impact of Trade Policy on FMCD Sector………………………………………………12

9.4 Employment and Wages have an effect on Consumer Goods Demand……..…………13

9.5 Demand for Consumer Durables…………………………………………….…………13

10. Future……………………………………………………………………………..…………15

11. Reference…………………………………………………………………………..………..16

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 1. Introduction of FMCD Sector
The Consumer Durables industry comprises of products and apparatuses for local utilize, for
example, TVs, fridges, air conditioners and washing machines. Instruments, for example, cell
phones and kitchen appliances like microwave ovens are also included in this category. The
sector has been seeing critical development as of late, helped by a few drivers, for example,
the rising retail boom, real estate and housing demand and more disposable income. This
industry has many international as well as national players, for example, BPL, Videocon,
Voltas, Blue Star, MIRC Electronics, Titan, Whirlpool, etc. The consumer durables industry
can be extensively arranged into two sections: Consumer Electronics and Consumer
Appliances and Consumer Appliances can be further classified into Brown Goods and White
Goods.

CONSUMER DURABLES
KITCHEN
APPLICANCES/BROWN CONSUMER
WHITE GOODS GOODS ELECTRONICS
• Refrigerator • Mixer • Mobile phones
• Washing machines • Grinder • Television
• Air-conditioners • Microwave ovens • Speakers
• Iron • DVD Player
• Electric fans • VCD Player
• Cooking Range
• Chimneys
• Toasters
• Coffee makers
• Sewing machines
• Dryers
• Heating appliances
• Dishwashers
• Vacuum cleaners
• Water coolers
• Water purifiers

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 2. Major players in the sector
The noteworthy players in Consumer Durables market in India are, Samsung, Whirlpool, LG,
Godrej, Sony, Hitachi, Videocon, Sony, IFB etc. Prominent Indian consumer durables
companies include Bajaj Electricals, Blue Star, BPL, Godrej, IFB, MIRC Electronics (Onida)
and Videocon etc. Multinational companies in India include Whirlpool, Samsung, Panasonic,
LG and Haier etc.
Samsung India Electronics, a subsidiary of South Korea's largest business group, Samsung,
tops the revenue chart among consumer durables companies in India. Followed by home-
grown Videocon Industries at the second position. LG, Sony Bajaj Electricals and Whirlpool
India follows the revenue list and takes third, fourth, Fifth and Sixth position respectively.

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 3. Barriers in the growth of the industry:
Consumers Durable sector in India is one that will be passing through some very Interesting
times. Whereas there is substantial scope for expansion as the demographics of India are a
positive for the sector and favourable too.

There are many factors which pose as a challenge to this industry, some of them are:

• Tax and Duty Structure:

India’s Taxation system is very complex, especially where indirect taxes are
concerned while Income Tax, excise and customs duty are set by the central
Government, States and municipalities and they also levy their own taxes.

• Limited Scale and quality

Most of the suppliers of components and raw material in India do not have the scale to
cater to the substantial demand in Industry, making them less cost competitive as
compared to imports. Also, the quality of inputs is not as competitive to Chinese or
other SE Asian counterparts. This has led various global majors to scale down
operation in the country.

• Increasing Competition
Manufacturers in India face strong competition from Chinese and other SE Asian
countries which have a huge supply base and installed capacities. Also, China
government provides numerous subsidies for manufacturing unit development which
the Indian government is not able to match.

• Capital intensive nature of business

As finance costs are high in India, cost of production in India is also higher as
compared to China and other SE Asian countries. Moreover, given the frequently
changing energy efficient norms manufacturers will need to invest substantial
amounts for products with high rating. The cost of capital at 12%-14% is much higher
as compared to the global average of 5%-7%.

• Infrastructure Deficiency:
The basic infrastructure for any industry comprises good roads, water, power
telecommunications, Finance, components, raw materials, and logistics. In India,
these facilities are not up to the mark even in the established industrial estates.

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 4. Emerging trends in India

• Expansion in new segments

With major firms like Micromax, Hindustan Unilever and even Voltas announcing
their expansion plans to enter the consumer durables industry, buyers can be assured
to see many new products in the market. While Micromax has already announced it
would invest $89.25 million to reinvent itself as a consumer electronic company,
Hindustan Unilever is not too far behind. Targeting the millennials, it will bring a
whole new range of skincare products to India this year.

• Increased affordability of products

Aggressive price point, year-round discounts on e-commerce, advanced technology

becoming cheap and reduced tax rates after GST- price reductions across various
consumer durable product segments have been on an all-time high. With Make in
India initiative also gaining momentum, domestic and Chinese manufacturers are
heavily investing in India. Manufacturing of products is expected to become cheap,
which is further expected to reduce the prices of the products.

• Growth in luxury market

Increase in double-income families and increase in spending capacity has ensured that
more luxury brands enter the Indian market. Not only are these brands increasing their
presence in malls and high street, they are also bringing their products to e-commerce
marketplace. The exclusive brand websites are another attraction to lure more
customers.

• Occasion-based marketing strategies

From partnering with e-retailers to offering massive discounts during festivals and
occasions like anniversaries and New Year, brands have tapped all sources to reach
the consumers. Strategic partnerships with foreign brands and increasing global
presence is also said to add to volume of sales this year.

• Focus on environment-friendly products

From launching energy-efficient products to reducing e-waste and promoting

recycling, companies are leaving no stone unturned to ensure that their products
promote eco-friendly initiatives. With different state governments also offering perks
for eco-friendly products and the increase in consumer awareness will only add to
more brands launching environment-friendly products.

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 5. Government policies
The Government of India is majorly concerned about the development of rural markets and
therefore, to encourage their growth keeps introducing policies and initiatives.

In a bid to make economic development inclusive, the Government of India has initiated
many schemes and programs that aim at improving the standard of living in rural areas. For
example, the Government of India launched a time-bound business plan for action called
Bharat Nirman. Under this program, action is proposed in the areas of Water Supply,
Housing, Telecommunication and IT, Roads, Electrification and Irrigation.

The other initiatives are:

• In 2012, National Policy on Electronics (NPE) was launched with an objective to

transform India into a global hub for Electronic System Design and Manufacturing
(ESDM).To attract investment of USD 100 billion, enhance exports to USD 80
billion, achieve a turnover of USD 400 billion and create employment of around 28
million are the key goals for 2020.

• As per Foreign Trade Policy (2015-2020), the House Product Scheme, Market
Linked Focus Product Scheme and Focus Market Scheme are now under a single
MEIS scheme, Export of notified goods (includes Ac parts and compressors,
refrigerating equipment compressors, fully automatic washing machines and colour
IV) and Asia-Oceania block) will be payable as percentage of realized FOB value (in
free foreign exchange.

• According to the Modifies Special Incentives Package scheme (MSIPS) for 10 years
the government will reimburse certain taxes and duties, amounting to 20% SEZs to
25% (non-SEZs) of capital investment (White goods are not covered in this scheme
and are in the draft MSIPS document).

• Zero duty EPCG scheme allows import of capital goods tor pre-production and post-
production (including CKD/SKD thereof as well as computer software system) at
zero Customs duty. As per the Foreign Trade Policy 2015-20, in order to promote
domestic capital goods manufacturing industry, the specific export obligation under
EPCG scheme where capital goods are procured from indigenous manufacturers
which was 90% earlier has been reduced to 75%.

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 6. Market Size and Growth rate:
Indian appliance and consumer electronics (ACE) market reached Rs 2.05 trillion (US$ 31.48
billion) in 2017.
• It is expected that CAGR will increase by 9% to reach Rs 3.15 trillion (US$ 48.37
billion) in 2022.

• In India, electronics hardware production increased to Rs 3.88 trillion (US$ 60.13

billion) in FY18 from Rs 1.90 trillion (US$ 31.13 billion) in FY14.
• Overall consumer durable exports reached US$ 0.78 billion in 2017. Consumer
electronics exports from India reached US$ 362.12 million in FY18 and US$ 234.19
million between Apr-Oct 2018.

• In India, Television industry is projected to reach Rs 862 billion (US$ 13.31billion) in

CY2020 and is estimated to have reached Rs 660 billion (US$ 10.19 billion) in
CY2017 already.

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 7. Growth Drivers

• Rising Disposable income and easy access to credit.

Source: Edelweiss

• Government’s initiatives towards urbanisation and transmission network

augmentation, electric supply channels have been able to cover the previously
underserved/unserved regions of India pretty considerably.
• Wide usability of Online Sales & also the rise in working age population has
stimulated the demand of consumer electronics. Innovative advertising and brand
promotions.
• Under Budget 2018-19, the government retained its focus on rural economy by
continuing the pro-poor and pro-farmer schemes.
• Growing awareness, easier access, and changing lifestyles have been the key growth
drivers for the consumer market. The Government of India's policies and regulatory
frameworks such as relaxation of license rules and approval of 51 per cent foreign
direct investment (FDI) in multi-brand and 100 per cent in single-brand retail are
some of the major growth drivers for the consumer market.

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 8. CSR Activities in FMCD Sector
CSR is the responsibility of a company towards the community and environment (both
ecological and social) in which it operates is known as CSR.

1. LG
a) Developing and distributing vaccines- LG electronics is aiding the International
Vaccine Institute (IVI) on the project to prevent environmental diseases in Asia
and Africa through vaccine development and provision programs.
b) Eco-friendly management activities- LG is making efforts to minimize
environmental pollution, to prevent accidents that occur during business
operations, to promote a policy to preserve the natural environment, and to
contribute to the overall health of our employees and communities where conduct
our business.
c) Campaign for eradicating malnourishment in children- LG Electronics has been
supporting the “Starved for Attention” campaign, a campaign by the doctors
which works towards aiding 195 thousand children suffering from malnutrition.
2. SONY
a) Sony recognizes the importance of preserving the natural environment in order to
create a sustainable society for our future generations. In order to achieve a zero
environmental footprint, it came with "Road to Zero," a new global environmental
plan.
b) Youth on assignment- Working with the World Photography Organization , as
well as collaborations between various NPO’s, the youth on assignment program
attaches the power of imaging to create consciousness of some of the challenges
currently confronting various sectors of the global community.
c) EYE SEE UNICEF Child Photography Workshop- The eye see photography
workshop encourages visual literacy among children, and increases involvement
in understanding and promoting positive social change Sony has been promoting
EYE SEE since 2006, and has been showcasing children’s photography and
messages around the world.
3. GODREJ
a) Good and Green- As part of Good & Green, by the year 2020, Godrej is
committed to create a more employable workforce, building a greener India and
innovating for good and green products.
b) Waste Management Initiative- As part of their sustainability goals, they are taking
measures to reduce, reuse and recycle waste in their manufacturing plants. With
solid waste management emerging as a serious challenge, they have further
extended their commitment to community projects.
c) Godrej Trusts- Godrej constantly make efforts to contribute meaningfully to the
communities that they are a part of. Approximately 23 per cent of the promoter
holding in the Godrej Group is held in trusts that invest in the environment, health
and education. Some of our key philanthropic initiatives include: Godrej
Memorial Hospital, world wide fund for nature, Teach for India, Smile Train,
Udayachal Schools.

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 9. Economic Factors affecting FMCD Sector
9.1 SWOT Analysis

With expanding mechanization and growing incomes, our tendency towards having different
consumer durables products is on the ascent.

India, a quickly creating country, has opened its market to globalization which has brought
about generally development for the normal resident. He has more chances of pay as well as
approaches a market that offers him a heap of decisions, magnificent after deal
administrations, low upkeep and considerably more. Apple, Hitachi, Porsche, TAG Heuer
have turned out to be normal names for us.

Strengths

As is apparent, the shopper strong industry in India is on a steeply rising bend. Till around
more than two decades prior, individuals were happy with whatever was accessible – would
you be able to review things, for example, highly contrasting TVs or cumbersome recording
devices?

Globalization has realized a change in perspective in the manner in which we think and upset
our lives. Global players have discovered a ravenous market in India – the shopper durables
industry has encountered a blast more than ever. Remote Direct Venture (FDI) has made it
conceivable to produce the products in India with the innovation from abroad; consequently
maintaining a strategic distance from substantial custom obligations and conventions, and
keeping the costs inside moderate reaches. Tie ups with money related organizations have
gotten the possibility of Simple Regularly scheduled payments (EMI) plans – Individuals
with moderate salary levels would now be able yearn for top of the line way of life items
without it being excessively substantial on his pocket.

Weaknesses

On the face, one may feel that there are definitely no provisos in this industry. Without a
doubt, there are some hazy areas - however fortunately maybe it is conceivable to beat them
to a reasonable degree. For instance, when a remote player needs to set up its own assembling
obligations, the Indian laws may take them in circles before even a scratch is acknowledged
on the ground. Additionally, at times, it ends up hard to give total after deal backing to the
client.

Opportunities

Rising requests, adaptable venture alternatives, impetuses from the Administration – the time
is ready for the buyer tough industry. A solid open door for outside players is to utilize
Indians as their nearby staff, who can beat language and social obstructions and interface
with the majority better. This is additionally an open door for gifted and accomplished youth
for being related with global organizations and gaining attractive bundles.

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Threats

Stiff competition from different brands for a solitary item has kept each player on his toes. In
India, informal spreads voyages quicker than light – so a solitary mark in the picture may cost
a brand beyond a reasonable doubt. Indeed, even today, we purchase items that guarantee us
great administration and not ones that make you sit tight for a considerable length of time in
light of the fact that an extra part is in travel from a faraway land.

9.2 Impact of Interest Rates on FMCD Sector

Interest rates directly affect the cost of funds for the industry. High interest rates increment
the expense of assets, in this way confining corporate salary. Then again, the lower financing
cost lessens the expense of assets, bringing about higher benefit. There are a few purposes
behind changes in loan fees, for example, money related arrangement, financial approach,
swelling rate, and so forth. Despite the purposes behind the adjustment in loan costs, the
example of interest in the economy is impacted by the adjustment in financing costs.
Financing costs likewise influence the open-door cost of speculators, which influences the
costs of bonds and values. Accordingly, the adjustments in loan fees sway on corporate
benefits, just as on market costs for securities. There are many loan cost markers. These are
the financing costs on the currency showcase or the rate of the essential credit of the loaning
organizations. Purchaser fund has turned into a noteworthy driver in the buyer tough industry.
In the case of more expensive consumer goods such as refrigerators, washing machines and
colour televisions, retailers market their products more aggressively by offering easy
financing options to consumers through partnership with banks.

9.3 Impact of Trade Policy on FMCD Sector

• Customs Duty Relaxation:

Custom duty is reduced on certain inputs like metals, wires, cables, refrigerators compressor
parts will promote the production of consumer electronics in India. Custom duty on
LCD/LED TV reduced to nil from 10 per cent.

• Reduced Central Excise:

A reduction (12 per cent to 10 per cent) in Central Excise duty was an effort to support
demand and fuel growth in consumer durable sector. Industry seeks relaxation in excise duty.
Excise duty is being reduced to 6 per cent on LED lamps and LEDs required for manufacture
of such lamps. Reduction in SAD from 4 per cent to nil, in import would also help LED
manufacturers.

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 • Encouragement to FDI:

100 per cent FDI is permitted in electronics hardware-manufacturing under the automatic
route. FDI into single brand retail has been increased from 51 per cent to 100 per cent; the
government is planning to hike FDI limit in multi-brand retail to 51 per cent.

EPCG, EHTP schemes: EPCG allows import of capital goods on paying 3.0 per cent customs
duty. EHTP provides benefits, such as duty waivers and tax incentives, to companies which
replace certain imports with local manufacturing.

National Electronics Policy 2012 and Government Initiatives: Aims to create an ecosystem
for a globally competitive electronic manufacturing sector and to achieve a turnover of about
US$ 400 billion by 2020, including investments of about US$ 100 billion, as well as to
provide employment to around 28 million people.

9.4 Employment and Wages have an effect on Consumer goods Demand

One of the most factors influencing demand for trade goods is that the level of employment.
The lot of individuals there are receiving a gradual financial gain and expecting to continue
receiving one, the lot of individuals there are to form discretionary disbursement purchases.
Therefore, the monthly percentage report is one economic indicant that provides clues to
demand for trade goods. The level of wages conjointly affects shopper disbursement. If
wages are steady rising, customers usually have a lot of discretionary financial gain to pay.

9.5 Demand for Consumer Durables

Demand for consumer durables in India has been growing on the back of rising incomes; this
trend is set to continue even due to factors like rising rural incomes, increasing urbanisation,
a growing middle class and changing lifestyles which aid demand growth in the FMCD sector
• Significant increment in discretionary salary and easy financing schemes have led to
shortened product replacement cycles and developing ways of lifestyle where
consumer durables, similar to ACs and LCD televisions, are seen as utility items as
compared to luxury possessions.
• Growth in demand from rural and semi-urban markets to outpace request from urban
markets
• Development in online retailing is a key factor to connect to new channel for buyers,
with increment in demand.
• Per capita Gross domestic product of India is relied upon to reach US$ 3,274 of every
2023 from US$ 1,749 out of 2017.
• Non metro markets specifically Vishakhapatnam, Bhopal, Vadodara, Chandigarh and
so on have developed quickly as to utilization, turning into the main target markets,
representing an enormous potential changing themselves into new business focuses
when contrasted with metro urban areas.

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Source: IBEF

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 10. Future
India is seeing key transformation in its policies, especially those linked with the regulatory
and business environment. The government is creating some long-due modification leading to
acknowledgement in the ‘Ease of Doing Business’ rankings. The appliance and consumer
electronics (ACE) sector and also the coming national policy for electronics (NPE) will also
bring about main policy changes for the industry. The India growth story is set for a foremost
push given the low penetration levels of consumer durables save for the television segment.

Despite the fact that the cost of finance has gone up with various regulatory and energy
efficiency parameters, GST has led to benefits being passed on to consumers. Also there is a
diverse environment with rising input costs and some operational efficiencies in the supply
chain that have led to gentle growth of the electronics and appliances industry. Some smaller
segments such as refrigeration and washing machines are increasing, whereas the large
television segment is seeing downfall.

Organised players have been spending aggressively on advertisements and marketing to

create awareness among customers and spruce up their brand image. With mobiles turning
into a noteworthy mode for promoting and content delivery, each 3 out of 4 users in the
nation are relied upon to access net through a cell phone by 2015. Amid 2012-22, aggregately
around USD 500 billion of advertisement spend is relied upon to occur on cell phones as
indicated by industry estimates.

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 11. Reference

• https://en.wikipedia.org/wiki/Durable_good

• https://www.ibef.org/industry/indian-consumer-market.aspx

• http://www.careratings.com/upload/NewsFiles/SplAnalysis/Consumer%20Durables_
May%202018.pdf

• http://articles.economictimes.indiatimes.com/2015-07-
24/news/64817266_1_durables-market-share-appliances-manufacturers-association

• http://businesstoday.intoday.in/story/consumer-electronics-market-
investment/1/191552.html

• https://www.indianretailer.com/article/whats-hot/trends/These-5-consumer-durables-
trends-will-change-the-game-this-year.a5922/

• https://www.pwc.in/assets/pdfs/publications/2018/future-of-consumer-durables-and-
electronics-in-india.pdf

• https://www.thehindubusinessline.com/economy/budget/consumer-durables-home-
appliance-makers-want-govt-to-lower-taxes/article10051893.ece

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