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Impact of Union Budget 2021 on Consumer Durable Sector

Impact of Union Budget 2021 on Consumer Durable Sector

Published on 12 February 2021 Views 224 Comments 3

Introduction: Union Budget 2021

The Consumer Durables sector is one of the fastest growing sectors in India. It hugely attracts the global as well as domestic players as they can be widely classified in two parts: Rural and Urban. This section provides the goods and appliances of domestic use such as refrigerators, air conditioners, washing machines, smartphones, laptops, etc. As per IBEF report, Indian Appliance and Consumer Electronics (ACE) market reached ₹76,400 crore in 2019 and is expected to get doubled to ₹1.48 lakh crore by 2025.

Impact of Budget on Consumer Durable Industries: consumer electronics industry budget expectations

Since the Budget 2021 was mainly focused on the base of “Atma Nirbhar Bharat”, several steps have been taken to shift the dependency of manufacturing of certain consumer goods industry trend 2021 durable from foreign markets which can be manufactured domestically. In order to promote the “Make in India” initiative, increment or imposition of custom duty on certain electronic goods are proposed by the Government.

Changes made in Custom Duty w.r.t electronic industry: Union Budget 2021 Highlights

  • Basic Custom Duty on specified parts of mobiles like PCBA, camera modules, chargers and connectors has been shifted from nil to 2.5%. This will effectively increase the cost of smartphones and cameras.

  • Increase of Custom duty from Inputs, Parts and Sub-Parts of manufacture of Lithium-Ion battery from nil to 2.5%. It will effectively increase the price of Smartphones, Laptop and Tablets.

  • Custom Duty on Moulded Plastic, manufacturing of charger and component has been increased from existing 10% to 15%. In this scenario it will directly impact the cost of a laptop.

  • On compressors of refrigerators/ AC’s, Custom duty has been increased from 12.5% to 15%.

  • On certain parts of mobile charger, custom duty has increased from nil to 10%. It will directly affect the cost of mobile phones.

Increasing import duties in certain consumer durables and electronic goods like Smartphones, Laptop, Refrigerators, AC’s, etc. will effectively make imports costlier and provide the opportunity for domestic companies to reassess their strategy of supply chain to manufacture in India only. 

PLI Scheme: Analysis of Budget 2021 India

In Budget, Government has announced the launching of Production-Linked Incentive Scheme w.e.f 1st April, 2021 in order to raise India’s manufacturing capacity and improve core competence to become an integral part of global supply chains. This benefit of the PLI scheme will cover 13 sectors including White Goods Industries, Telecom, Textiles, electronics, Auto Part, Pharma and chemical Sells. In total ₹1.97 lakh crore will be disbursed under this scheme over the 5-year time period, starting from FY 2021-22.

Key Points of PLI Scheme: Union Budget 2021

  • Eligible investors in air-conditioners and LED Lights will be granted incentives worth ₹6,238 crore over the period of 5 years.

  • Eligible investors are proposed with incentives of 4%-6% on incremental sales of goods manufactured in India for a period of 5 years.

Stocks likely to be benefited Post-Budget:

Conclusion: Impact of Union Budget 2021 on Indian economy

Government initiative towards capital expenditure will eventually enhance the demand of final goods and services by ending the impact on consumer market due to budget 2021. Strong standing on Make in India/Atma Nirbhar Bharat will lead to reduced foreign dependency and create employment. PLI Scheme  will also support the sector upto a certain level and help in coming back on track post pandemic. Overall, Union Budget FY2021-22 stands tall for the impact of budget 2021 on different sectors and will make the industry exhilarated.

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