New Delhi, Oct 18 (IANS): High input costs, rising interest rates and a lingering weakness of the rupee might have forced them to increase prices, but Indian consumer durable firms are still optimistic about consumers flocking to stores this festive season.
Given that inflation is still reigning high and the recent hike in petrol prices has dampened consumer sentiments somewhat, white goods manufacturers have been selective in increasing prices.
"Demand would not be affected as it is the festive season and the price hike has not been to a huge extent. Besides, we have hiked prices only on select products and excluded products such as LED and LCD TVs which contribute to a significant portion of the demand during this season," LG India chief operating officer Y.V. Verma told IANS.
LG, which has increased prices of select products, including refrigerators, microwave ovens and IT products by an average of 3 percent, imports top-end models of frost-free refrigerators and front loading washing machines as completely built units. The impact of the weakening of rupee has resulted in costs going up 8-10 percent.
"We will pass only 3-4 percent to the consumers," said Verma.
The consumer electronics market in India is a $10.4 billion industry and the festival season contributes over 30 percent to the total revenue earned by a company during the year.
Samsung also has increased prices on select products by a quantum similar to LG's but is confident that sales would be robust during the Diwali season. Also on the cards are gifts worth Rs.150 crore to entice customers.
"We had good sales during Onam and are optimistic about the Diwali season as well. I do not think there is any reason to panic at this stage. In fact, we are optimistic that the festival season would spur the demand," Mahesh Krishnan, vice-president, home appliances, Samsung India, told IANS.
Stubborn inflation and the rupee depreciating to levels below 49 to a dollar have hit consumer durable firms. Headline inflation has been hovering around the double-digit level, and was recorded at 9.72 percent in September.
Also of concern to white goods companies is the dozen rate hikes by the Reserve Bank of India (RBI) which have made loans costlier.
In recent years, availing of loans, and that too offered by retailers, has been picking up but this again is reserved for the more higher priced consumer durables like LCDs and not all products.
Analysts expect inflation and rising interest rates to reduce the disposal income in the hands of consumers.
"The bottom line is that while there is likely to be a wait and watch attitude amongst consumers, it is not likely to drastically impact consumer durable sales and the industry is likely to witness a 14-15 percent growth this year as well," Deepa Doraiswamy, industry manager, A&E practice, Frost & Sullivan South Asia, told IANS.
Also, replacement sales could be delayed and influenced by the price and interest rate hike. However, first time buyers could continue buying, especially during the festival season, added Doraiswamy.
Some companies are, in fact, forced to hike prices even at the cost of slowing sales.
"There could be slight impact on consumer sentiments. In fact we were thinking of increasing the price after the festival season but the rupee depreciation made it imperative to take this decision," said Eric Braganza, president, India operations, Haier.
"However, we have a lot of offers and confirmed gifts which will help us draw customers. I do not anticipate any trouble right now," he added.
The peak Diwali season is what most firms are counting on. The buying sentiment that the festival brings on, combined with extra funds that have been stashed aside for spending or employee bonus, helps improve sales.
"During the festival season, despite all the negativity people buy products because of religious sentiments and some amount of liquidity which comes in the form of the bonus that they get from their employers," Shantanu Das Gupta, vice president, corporate affairs and strategy, Whirlpool India, told IANS.