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issue: March 2003 APPLIANCE Magazine

New Delhi Report
Easy Credit Drives Indian Consumer Durables Market


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The rapid growth of the consumer durables sector in India has been attributed to a number of factors, including the entry of multinationals and the competitive strategies adopted by them.

However, a key driver of sales growth in the white goods market has been the easy access to consumer finance. The cost of consumer credit has declined significantly, with retail loans registering an average growth of 27 percent in the past 3 years. Commercial credit has grown by just 13.6 percent during the same period. There has been a sharp rise in disbursement of loans for consumer durables and housing.

Over the past decade, sales of white goods in rural markets have been rising steadily. The rural market grew at an average rate of about 24 percent per year between 1993 and 1998. The market for white goods in urban India has been declining, from about an average growth rate of 21.4 percent during the initial years of the 1990s, to 18.1 percent during the mid-1990s. Recently, however, there has been a revival in the urban market that is being attributed to the rise in consumer finance for durable goods.

Growth per annum

1992-1993 to 1995-1996

1995-1996 to 1997-1998

1997-1998 to 1998-1999

1998-1999 to 1999-2000

North

24.5 percent

14.5 percent

15.2 percent

15.7 percent

South

20.8 percent

22.4 percent

15.7 percent

20.8 percent

East

26.4 percent

22.7 percent

27 percent

19.8 percent

West

19.2 percent

21.7 percent

13.6 percent

19.4 percent

Total

22 percent

19.8 percent

16.2 percent

18.9 percent

Source: NCAER

The South and West account for nearly 70-80 percent of the total financed purchases in the country. Consumer finance has existed in the South in the shape of "hire purchase schemes" for a long time. However, with more players in the consumer finance sector, the costs of credit have declined. This has led to a growth in financed purchases of white goods both in rural and urban areas.

Take for example, the rural market's share of financed purchases in the white goods sector. According to figures from the National Council for Applied Economic Research (NCAER), New Delhi, the rural market's share of financed purchased in the north was 39.5 percent in 1999-2000 compared to 19.6 percent in 1992-1993. In the South, financed purchases had gone up to 35.6 percent from 29.9 percent in 1992-1993. Similarly in the East, there was a rise in financed purchases from 26.8% to 30.9 percent during the same period. Only the West saw a decline in the rural share of financed purchases: 27.5 percent in 1992-1993, compared to 25.3 percent in 1999-2000. Overall, the all-India rural share of purchases with consumer finance of white goods has grown: 26.4 percent in 1992-1993 compared to 32.9 percent in 1999-2000.

These facts open up a new area of marketing opportunities for consumer durable and appliance makers. Marketers can no longer hope to tap into a readymade marketÐthey will have to create demand. Manufacturers will have to piggyback their products with products in the consumer finance market. This also means that they will have to expand their network of sales and after-service outlets as to reach new consumers in the Indian market. Exposure to new consumers and new markets will also help manufacturers to collate information about the need gaps of consumers, and provide them with an opportunity of launching appropriate products.

This report is filed by Adite Chatterjee, New Delhi correspondent, APPLIANCE magazine.

 

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