ASSOCHAM and Ernst & Young have jointly projected size of electronics and appliances industry reaching at US$ 40 billion by 2012 with a CAGR of 11% provided a dedicated department for electronics and appliances is created by the government to promote domestic market and attracting investments from global players.

In a Paper Electronics and Appliances Manufacturing – the India opportunity jointly brought out by ASSOCHAM and E&Y which is released here today by Minister of State for Communication & IT, Mr. Sachin Pilot points out the market size of electronics and appliances industry in India is estimated to be US$ 27.38 bln for 2008-09.

The industry has grown 7.1% over previous year in terms of rupees.  Due to currency devaluation by nearly 25% in India in 2008-09, industry reflects a negative growth when shown in terms of dollar. However, CAGR of electronics and appliances has been 20.3% for period 2004 to 2008 in terms of rupee.

The Paper highlights that the two objectives of promoting the domestic market and export market should be worked upon simultaneously to increase production share of world market.  The key challenges in achieving this are identified and be supported with initiatives both from government and industry.

The required initiatives include exploration of possibilities for a dedicated department for electronics and appliances as also establishment of a master plan for electronics and appliances sector.  In addition, it emphasizes strengthening of investment promotion activities through research and development and signing of Free Trade Agreements.

It has recommended a 25 year’s master plan with a long term vision for electronics and appliances industry, deriving strategic options available to attract manufacturing facilities in India.  The proposed master plan should be on lines of Vietnam and China which revolutionized electronics and appliances industry in these two countries.

According to findings of ASSOCHAM-E&Y paper, key factors that will drive domestic electronics and appliances market include growth in per capita income, shift in cultural patterns and life-styles and access to credit. Nearly 10 million households are estimated to have income levels above US$ 10,000 per annum. With a growth of 20% in per capita income, this segments opportunities for  luxury products. More than 95% of households are estimated to be below the income level of US$ 10,000 in 2009-10.

Some initiatives taken by government in improving income levels include implementation of 6th Pay Commission.  The salaries of central government employees have been revised by an average of 21%, providing nearly 5 million government employees with an additional spend of US$ 3.7 billion in financial year 2008.

With an allocation of US$ 8.15 billion in the budget for the year 2009-10, the National Rural Employment Guarantee Act is aimed at increasing wage employment in rural areas. The scheme provided employment opportunities to more than 44.7 million households in the year 2008-09.  This will push up demand for consumer durables including electronics also.

Secondly, rising incomes and evolving life styles have reduced the replacement cycle.  The replacement cycle which was nearly 9 years for television and 12 years for domestic appliances has come down to approx 4-5 years for television and 7-8 years for domestic appliances.

Courtesy: ASSOCHAM

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Posted by Naresh Koshti on 1 September, 2009 3:25:23 PM IST #