Loans, discounts rain as inflation chokes festive demand

Wary manufacturers are backing government-blessed cheap loans with deep discounts. But is it enough to revive buying sentiments?

business Updated: Oct 08, 2013 22:06 IST
consumer durables,loans,discounts

It’s that time of the year again when the customer is king, but the crown is shaky.

The big question: In such times of slowdown and modest salary hikes, are you willing to shell out money to buy that dream car or upgrade your existing smartphone?

It is raining loans for consumer durables this festive season, and the government and RBI moved this week to make it easier for banks to lend to durable buyers.

However, that does not seem to be enough for manufacturers because buying sentiment is still weak. Companies are backing up loan offers with deep discounts in the backdrop of an economic slowdown and high inflation that are making consumers reluctant to open their wallets.

Though the credit growth in 2013-14 stood at 18%, certain sectors remained subdued and demand for credit remained sluggish, say industry associations.

Surveys, too, are painting a gloomy picture.

According to a report by industry association Assocham, Diwali spending may be down 40% this year. And as much as 57% of those it surveyed are looking for discounts to push them into making purchases.

So, with the festival season accounting for up to 20% of their annual sales, companies will have to embark on an aggressive strategy to lure buyers.

“We have had good growth during Onam wherein sales for our LED TVs grew by 47% and there was a jump of 30% jump in sales of high-end refrigerators. With fresh government impetus we expect this momentum to continue further,” said Sanjeev Aggarwal, sales head, LG India.

Sony India, too, said it expects sales momentum for its premium-end products such as Bravia televisions and Xperia smartphones to continue. Samsung and Panasonic also expressed confidence that growth momentum would get further boost.

But not everyone is hopeful, especially auto makers reeling under the effect of high input costs.

“We do not expect prevailing negative sentiments to undergo any change and the market will not witness any rebound in the short-term,” said P Balendran, senior vice-president, General Motors India. “There can be only a marginal improvement in the festive season. The level of discounts will also not go up significantly as the industry is already squeezed on margins. Discretionary sprending by consumers has almost come to a standstill.”

“The festive season started with Onam in the South and Ganesh Chaturthi in the West last month and frankly it has not been up to expectations,” said a senior Maruti official. “We are pinning hopes on the Navratra but the situation does not look very optimistic.”

The government meanwhile, it seems, is pulling all stops to boost buying sentiments.

While the finance ministry on Thursday announced cheaper interest rates on loans to buy consumer durables such as televisions, refrigerators and motorbikes, RBI governor Raghuram Rajan on Friday said the government and banks are in talks to work out the contours of cheaper loan schemes that could be announced soon.

Their moves may light up the Diwali a tad more than previously thought.

First Published: Oct 04, 2013 23:48 IST