The long-term outlook is supportive for the sector. According to IBEF, Indian appliance and consumer electronics (ACE) market reached Rs. 76,400 crore (US$ 10.93 billion) in 2019. Appliances and consumer electronics industry is expected to double to reach Rs. 1.48 lakh crore (US$ 21.18 billion) by 2025.According to Retailers Association of India (RAI), sales of consumer electronics and appliances in the third quarter of FY21 increased by 23.5%, as compared with same period in the last fiscal year. Electronics hardware production in the country increased from Rs. 4.43 trillion (US$ 72.38 billion) in FY19 to Rs. 5.47 trillion (US$ 89.38 billion) in FY20.

Demand for electronics hardware in India is expected to reach US$ 400 billion by FY24. The ‘National Policy on Electronics 2019' is targeting production of one billion mobile handsets valued at US$ 190 billion by 2025, out of which 600 million handsets valued at US$ 100 billion are likely to be exported. In 2020, the Indian government targeted China with new restrictions on colour television and mobile phones. According to a report by Care Ratings, consumer electronics and appliances manufacturers are set to increase their production by 5-8% in FY22, after witnessing a contraction in demand in FY21.

Growing awareness, easier access, and changing lifestyle have been and will continue to stay as the key growth drivers for the consumer market. The Government of India's policies and regulatory frameworks, such as relaxation of license rules and approval of 51% Foreign Direct Investment (FDI) in multi-brand and 100% in single-brand retail, are some of the major growth drivers for the consumer market. According to the Department for Promotion of Industry and Internal Trade (DPIIT), between April 2000 and June 2021, electronic goods attracted FDI inflows of US$ 3.2 billion.

In September 2021, FICCI Electronics Manufacturing Committee Chairperson Manish Sharma said that ~52 companies have applied for availing PLIs for white goods makers, proposing an investment of ~Rs. 6,000 crore (US$ 813 million) in manufacturing components for air conditioners (ACs) and LED lights. Most of these investments are expected to happen in the next 2-3 years; following this, local production for components for ACs and LED lights is expected to start.

Private Consumption Slightly On Mend

The private final consumption expenditure is estimated to grow by 6.9% in FY22, according to latest advance estimates of National Income. However, the share of private final consumption expenditure in the GDP is seen falling to 54.8 percent in FY22 from 56.0 percent in FY21 and 57.1 percent in FY20. This is likely because of the long term hit on the economy due to the lockdowns. The first advance estimate suggests private final consumption expenditure will grow by just 1.8% year-on-year in the second half of FY22.

Meanwhile, the overall spending trends will take some time to come back to normal times given the toll taken by the pandemic. Consumer confidence in India hit historic lows due to the virus outbreak, according to a latest research paper from the Reserve Bank of India (RBI). Household income was impacted the most by the pandemic-induced restrictions, causing consumer confidence to hit multiple lows during this period, the central bank noted.The effect of lower incomes is seen on consumers' perception about general economic situation and employment as well, RBI says in its Consumer Confidence Survey, adding that these parameters seem to be the major drivers of lower discretionary spending by consumers.Overall spending has been shored up by essential spending, which is mostly influenced by prices.

Sentiments of consumers in severely impacted cities – Mumbai and Delhi -- were more affected as compared to that for respondents in other places, says RBI. Consumers' perception of the prevailing economic situation and their expectations for the future also influence their spending, saving and investment behaviour. During economic expansion, consumers are usually more confident about their income and may spend more. On the other hand, when the economy contracts, the consumers are, generally, more pessimistic about their future and may try to save more by curbing their spending.

Outlook:

The demand will likely remain firm for local consumer durables segment though worries over the new variant of Covid-19 and elevated cost pressures could weigh on sentiments in near term. The stress on private consumption spending could get intense if the current spurt in Covid-19 cases leads to extended lockdowns or severe restrictions on the commercial activities. Meanwhile, elevated price levels could weigh on spending on durables in rural areas. The All-India Consumer Price Index Numbers for Agricultural Labourers (CPI-AL) and Rural Labourers (CPI-RL) for the month of December 2021 increased by 5 points each to stand at 1097 and 1106 points respectively. Point to point rate of inflation based on the CPI-AL and CPI-RL stood at 4.78% & 5.03% in December 2021, compared to 3.02% & 3.38% respectively in November 2021 and 3.25% and 3.34% respectively during the corresponding month of the previous year. The Food inflation stood at 2.99% & 3.17% in December 2021, compared to 0.88% & 1.07% respectively in November 2021 and 2.97%& 2.96% respectively during the corresponding month of the previous year.

Consumer durables Index Of Industrial Production