Kolkata | New Delhi: Manufacturers of consumer goods such as electronics, household appliances and two-wheelers are planning to expand production or increase capacity utilisation of entry-level products on expectations that demand for mass market items will revive following income tax benefits in the budget.
Demand for mass products has been languishing for the last 3-4 years as consumers grappled with inflationary pressures, prompting most companies to scale down production. Some even stopped manufacturing entry-level goods, instead ramping up production of premium products whose demand shot up after the pandemic.
“The savings from tax benefits will increase cash in the hands of consumers which should boost sales of mass appliances, smartphones priced till ₹12,000, and 32-inch televisions,” said Atul Lall, managing director at Dixon Technologies, one of India’s largest contract manufacturers of electronic products. “Since most companies now work on a hybrid production model, this should increase the order book of contract electronic manufacturers, improving capacity utilisation,” he said.
Godrej Appliances business head Kamal Nandi said typically consumers earning up to ₹10-12 lakh per annum are buyers of entry to mid-segment products. “The saving in tax will boost this segment’s sales and companies may expand their production accordingly,” he said.
The government in the budget raised the nil taxation threshold to ₹12 lakh annual income from ₹7 lakh. The step is expected to benefit 10 million taxpayers who can now save ₹20,000-80,000 per year on taxes. This will also lower the income tax outgo of high income group people as well.
Sales growth in entry motorcycles-with engine capacities exceeding 75 cc and less than 110cc-has been subdued despite an improvement in the domestic two-wheeler market. During April-December 2024, while overall two-wheeler sales rose by 11.6%, entry motorcycle sales grew 3.5%, mirroring the pressure on discretionary spends by consumers at the entry-level. In electronic products, volume sales remained flat so far this fiscal year due to lower sales of entry products.
“The budget’s focus on rationalising income tax and providing relief to the middle class is a welcome move that would boost consumer sentiment. With increased disposable income, we expect demand in the entry-level segment to see a positive shift,” said Yogesh Mathur, director, sales & marketing at Honda Motorcycle & Scooter India.
“Additionally, measures to support domestic manufacturing will further support industry’s growth.”
