Boost to disposable incomes via tax cuts will spur demand for consumer durables

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SME Times News Bureau | 27 Jan, 2022
The extension of PLI benefits for consumer durables companies and increase in customs duty if any in the Union Budget 2022 will drive domestic manufacturing.

While the PLI scheme commenced from FY22, some companies have not yet been able to complete the required capex and drive growth due to Covid waves in FY22. Hence, we endorse the belief that extension of PLI benefits by 1-2 years will be positive to industry, ICICI Securities said in a report on the white goods sector.

Increase in customs duty on certain inputs may increase India production. Any additional levy on imports of raw materials may lead to increase in domestic production. It will be beneficial to manufacturing companies such as Dixon and Amber. However, we believe, it may disrupt the production of finished goods in the short term and may raise costs for the companies, the report said.

Any increase in sops on wind and solar power generation will reduce the power costs for most companies in the sector. We note power costs amount to 2-3 per cent of net sales of these companies. However, manufacturers such as Amber and Dixon may stand to benefit more.

Tax cuts if any and higher disposable incomes to boost consumption, the report said. We believe initiatives to boost disposable incomes via tax cuts or higher government spending will result in higher demand for consumer durables. We believe initiatives to step up rural consumption (20-30 per cent of durables consumption) will drive further growth, the report said.

Any sops to drive growth of the real estate sector will boost B2B categories such as wires & cables, switches & switchgear, and lighting.