This year will be a Dull Festive season for Electronic Goods

India's consumer durable industry is unlikely to have an exciting festive season this year, thanks to the recent hike in prices of consumer electronics and the uncertain economic conditions in the country as well as internationally.

"Last year was very good for us in terms of sales. This year we do not expect high sales. There are no visible discounts and EMI has gone up considerably. Certainly people are not so enthusiastic in spending due to the uncertain economic scenario," a Samsung showroom owner in West Delhi said.

The interest rate on loans for consumer products has shot up by about four percentage points in the last two years, from 13 per cent per annum in September 2009 to 16-17 per cent now.

According to Federation of Indian Chambers of Commerce and Industry (Ficci) data, consumer durable industry grew at just 4.2 per cent between April and July this year against 18.5 per cent in the year-ago period.

Korean consumer durable giant Samsung has increased the prices of many of its products by 1.5 per cent due to the depreciation of the Indian rupee. The other Korean consumer durable giant LG Electronics too, has announced a hike in prices of between three and six per cent for its products citing rupee depreciation as the cause.

LG hiked the prices of its IT products by six per cent and rates of washing machines, microwave ovens and flat cathode ray tubes are up by three per cent. "Due to continuous rupee depreciation, it has become imperative for us to consider the price hike in India," Sanjoy Bhattacharya, product group head, IT, LG Electronics India, said.

Consumer durable firms claim price hikes will affect sales. "Indian middle class consumers are price sensitive. Price hike and inflation will certainly have an impact on the purchasing decisions of consumers. We expect sales to grow by 10-12 per cent as compared to 25- 30 per cent last year. The impact will be more on the premium category products," a senior marketing executive from Sony India said.

Despite input costs gnawing at the profit margins of consumer durable companies, they are postponing their decision to hike prices till after the festive season.

According to Manish Sharma, director, marketing and sales, Panasonic India, the festive season is an important period for consumer durable companies as it accounts for 30-40 per cent of their total annual sales.

In the run-up to the festive season, firms are trying their best to ramp up sales with the help of aggressive marketing and promotional campaigns. Panasonic is investing Rs 100 crore for marketing besides a slew of promotional offers. Samsung is doling out Rs 150 crore just on giving away gifts to consumers, excluding the budget on advertising.