Monday, February 22, 2010

George Menezes, COO – Appliance Division,

With the budget round the corner, the foremost question in everyone’s mind is, ‘Will the country be able to maintain its growth trajectory if the fiscal stimuli are withdrawn?’People advocating this assume that the economy is back in full steam and the scorching pace of growth will continue. Honestly, we are concerned! The growth momentum that we have achieved should not be dampened by any sudden withdrawal or roll back of the stimulus measures initiated to drive consumption and growth. The current cost escalation, inflation and the likely tightening of interest rates do not augur well for business. The buoyancy that we saw in the market can get severely dented. As it is, people are getting cautious with their spending, as disposable incomes are coming down with soaring inflation impacting cost of living. We have clearly seen this trend in the urban markets where the spending this year has considerably slowed down. It was only the smaller towns and rural economies which did well because of the huge government spending which went into rural infrastructure, employee guarantee schemes, which could, to a large extent, moderate the impact of the lack of monsoons last year. While looking ahead, nobody is sure of how benevolent will be the weather gods. If there is a repeat of last year, then, we are in for a difficult time ahead. As somebody said, the stimulus package is like a steroid. A sudden injection can ramp up performance but a sudden withdrawal can deal a crippling blow. Hence we have to think this over very carefully and move cautiously. The Consumer Durable industry, where we operate, got a fillip last year because of 3 major reasons: (a) an excise drop which brought down the prices, (b) an improved liquidity which helped Consumers and Trade alike and last not but the least, (c) a scorching summer which propelled the growth of cooling products. And if these 3 variables which helped last year were to go adverse this year, just imagine the plight! The industry growth in the fiscal year 2009-10 actually picked up only in the latter part of the year and if you look at the year as a whole, it is encouraging but not stupendous, something to go gaga over! In our country, where penetration levels of consumer durables are at a pathetically low level, it is important to create an environment which will encourage spending and propel growth. While the durable majors are doing their bit by coming out with Innovative Products and Technologies, Energy Efficient appliances and Exclusive Consumer Offers, a conducive tax regime and supportive monetary policy will complement the industry’s efforts. Sustainability is the key word!

George Menezes
COO – Appliance Division
Godrej & Boyce Mfg. Company Ltd

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