Interim Budget 2014: Excise duty cuts to have limited impact on consumer durables sales

The reduction in excise duty on consumer durables to 10 per cent from 12 per cent is likely to have a limited impact on the sales of firms such as Whirlpool, Bajaj Electricals, Hitachi, V-Guard, TTK Prestige and Hawkins Cookers.

The cut proposed in the interim Budget will reduce the sale price by 1.8 per cent, which may not be enough, given the fall in demand for such goods over the past few quarters owing to the overall economic slowdown.

“The decrease in excise duty from 12 per cent to 10 per cent will boost sentiment. However, a 2 per cent drop in excise duty against the average price increase of 10-12 per cent over the last two years may not propel growth in the appliances industry,” said Kamal Nandi, executive vice-president, sales and marketing at Godrej Appliances.

Experts and executives say a more significant boost could be a cut in interest rates. “Our observation says that consumer interest is more influenced by the EMI cut rather than duty cut,” said Abneesh Roy, consumer analyst at Edelweiss financial services.

Unless interest rates go down, a meaningful pick-up in demand is unlikely, he added. The tepid response to the duty cut was visible in the stocks of companies such as Bajaj Electricals, Whirlpool and V Guard, which did not show any surge in buying activity following the announcement by the finance minister.