Consumer Goods: Ficci Study Belies IIP`S Poor Outlook

The consumer durables sector is expected to grow a healthy 12 per cent in 2007-08, the Federation of Indian Chambers of Commerce and Industry (Ficci) has said.

This is at variance with the steep decline shown by the Index of Industrial Production (IIP) for August and earlier months.

Ficci’s latest consumer durables survey shows that the rural market, which accounts for nearly 70 per cent households, is witnessing a strong annual growth of 25 per cent, even as the urban market is growing 7-10 per cent.

According to Ficci, the sector grew 11.5 per cent in 2006-07 and 8.5 per cent the previous year. The survey implies a sharp rebound in consumer spending, which challenges this year’s performance as captured by the IIP.

According to the IIP data for August, the consumer goods sector grew 0.5 per cent, as against 5.69 per cent in July, and much lower than August 2006. This was the lowest growth the segment had seen till then and came on the back of higher interest rates, which impacted demand, the IIP showed.

The data were contested by consumer goods companies, which said their sales were robust. The industry is expecting good sales in the ongoing festival season.

The Ficci survey, involving representatives of consumer durables industry, allied industry organisations, government agencies and public sector undertakings, revealed the sector was poised for a quantum leap due to technological improvements, falling prices due to competition, aggressive marketing and declining import tariffs.

According to the survey, the fast-growing segments that have led the growth are high-end products like flat-panel televisions (TVs), LCD TVs, plasma TVs, slim CRT TVs, frost-free refrigerators, fully automatic washing machines, split air-conditioners, DVD players, microwave ovens and home theatre systems.

“The findings reflect the changing dynamics of consumer behaviour – luxury goods are now being perceived as necessities with higher disposable incomes being spent on lifestyle products. There is a discernible shift in the consumers’ preference in favour of higher-end, technologically superior branded products, the demand being spurred by increasing consumer awareness and preference for new models,” said the survey report.