India is likely to emerge as the world’s largest middle class consumer market with an aggregated consumer spend of nearly USD 13 trillion by 2030 (source: Deloitte report titled 'India matters: winning in growth markets'’). India’s robust economic growth and rising household incomes are the catalysts for consumer durables as well as the growth in electrical industry.  Union Budget plays an important part in laying down the path for economic progress of the country. Post GST, Budget 2018-19 is even more crucial for consumer durables and electrical sector. Moreover, rural India is a strong market, as it has 70 percent of country’s population. Therefore, any reforms or concessions in the Union Budget, for rural India, will be keenly watched by the industry players.

 Key budget expectations:

• The industry feels that GST rate of 28 percent should be revised to 18 percent, as refrigerators, TVs, etc. are no longer luxuries in an Indian household.

• The government is expected to spend more on the rural side with an aim to double the farm income by 2022. Thus, there is a lot of scope for the industry to grow, buoyed by pro-poor and pro-farmer schemes.

• As per industry sources, the government is also contemplating to hike personal tax exemption limit and tweak the tax slabs. Any tax relief is likely to spur spending, and thereby, benefit consumer electricals.

• Budgetary focus on affordable housing and infrastructure development will provide growth triggers for the industry.

• The Consumer Electronics and Appliances Manufacturers Association’s (CEAMA) demand is that the government should increase the basic customs duty on appliances and consumer electronics goods from 10 percent to 20 percent to discourage imports.

• Off late, the consumer electrical industry is moving towards higher energy norms particularly in ACs and refrigerators. Therefore, industry expects the government to give out incentives to consumers and manufacturers in order to encourage them to move towards higher star-rated products.

Our take

We expect budgetary emphasis on rural India will boost consumption and benefit the consumer electrical industry. We like companies such as Bajaj Electricals and Crompton Greaves Consumer Electricals Ltd on account of market share gain across their product categories. We are also positive on IFB Industries (expansion in distribution network and new product launches) and Whirlpool of India (based on major contribution of high margin products - refrigerators and washing machines).  – IIFL