1.main report

CONTENT

Page No.
List of Tables
List of Annexure
Executive Summary i-v
Chapter 1 Introduction
1.1 Background 1
1.2 Objectives of the Study 3
1.3 Terms of Reference 3
1.4 Methodology 4
1.5 Limitations 6
Chapter 2 Light Electrical Industry: Large Home Appliances Segment
2.1 Light Electrical Industry in India 7
2.2 Growth of Durable Product Market in India 8

2.3 Large Home Appliances Segment 10

2.3.1 Preferential Government Policies 10

2.3.2 India to enforce energy efficiency in climate fight 12
2.3.3 Air Conditioners 13
2.3.3.1 Types of Air Conditioners 14
2.3.3.2 Penetration in India and Competing Countries 14
2.3.3.3 Players and Market Share 14
2.3.4 Refrigerators 16
2.3.5 Washing Machines 19
2.3.5.1 Penetration of Washing Machines in India and Global 21

2.3.5.3 Future Scenario 22
2.3.6 Vacuum Cleaners 23
2.3.7 Microwave Ovens 23
2.8 Financial Analysis of Domestic Electrical Appliances 25
2.9 Financial Analysis of Refrigerators and Air Conditioners 26
Chapter 3 Impact of WTO, FTAs and Global Economic Recession
3.1 Introduction 27

3.2 WTO and Implications for Indian Economy 28
3.3 Impediments to the growth of India’s International Trade 29

3.4 From the Uruguay Round to Doha Round 29

3.5 The Doha Development Round 30

3.6 Free Trade Agreements (FTAs) 31

3.6.1 India- Thailand Free Trade Agreement 32
3.7 Product Categories under Early Harvest Scheme 34

3.8 India signs FTA with ASEAN 35
3.9 Global Economic Recession 36

Chapter 4 Productivity Growth of Large Home Appliances
4.1 Introduction 38
4.2 Air Conditioner 38
4.2.1 Key Features of the Registered Factory Sector 38
4.2.2 Data and Variables 39
4.2.3 Growth Air Conditioner Sector 40
4.2.4 Partial and Total Factor Productivity Growth for Air Conditioner 40
Industry
4.3 Refrigerator 43
4.3.3 Growth Refrigerator Sector 44
4.3.4 Partial and Total Factor Productivity Growth for Refrigerator 45
Industry

4.4 Washing Machine 48
4.4.3 Growth of Washing Machine 49

4.4.4 Partial and Total Factor Productivity Growth for Washing Machine 50
Chapter 5 Competitiveness of Large Home Appliances in India

5.1 Introduction 53
5.2 Export Trends 53
5.3 Import Trends 54
5.4 Export Competitiveness of Large Home Appliances 55
5.5 Air Conditioners 57
5.6 Refrigerator 60
5.8 Vacuum Cleaners 71
5.9 Microwave Ovens 74
5.10 Conclusion 76
Chapter 6 Field Survey Findings of Large Home Appliances
6.1 Profile of Light Electrical Manufacturing Units 77
6.2 Product Category wise distribution of the manufacturing units 78
6.3 Refrigerator 78
6.3.1 General Profile of Respondents 78
6.3.2 Employment Trend 79
6.3.3 Domestic Market Trend 79
6.3.4 Productivity and Competitiveness 83
6.4 Air Conditioners 84

6.5 Washing Machines 90
6.6 Vacuum Cleaners 96
6.7 Microwave Oven 101
6.8 Conclusions 107
Chapter 7 Summary of Diagnostic Case Studies 109
7.1 Introduction 109
7.2 Air Conditioner Manufacturing Unit 1: Mumbai, Maharashtra 109
7.3 Air Conditioner Manufacturing Unit 2: Mumbai, Maharashtra 111
7.4 Refrigerator Manufacturing Unit 3: NOIDA, Uttar Pradesh 113
7.5 Refrigerator Manufacturing Unit 4: Aurangabad, Maharashtra 114
7.6 Washing Machine Manufacturing Unit 5: Gurgaon, Haryana 116
7.7 Washing Machine Manufacturing Unit 6: NOIDA, Uttar Pradesh 116
7.8 Microwave Ovens Manufacturing Unit 7: NOIDA, Uttar Pradesh 117
7.9 Microwave Ovens Manufacturing Unit 8: Mumbai, Maharashtra 118
7.10 Vacuum Cleaners Manufacturing Unit 9: Mumbai, Maharashtra 119
7.11 Vacuum Cleaners Manufacturing Unit 10: NOIDA, Uttar Pradesh 119

Chapter 8 SWOT Analysis of Large Home Appliances in India
8.1 Air Conditioner 121
8.2 Refrigerator 122
8.4 Vacuum Cleaner 123
8.5 Microwave Oven 124
Chapter 9 Factors Constraining the Growth of the Sector
9.1 Electrical Energy Generation Review 125
Chapter 10 Summary of Findings: Study of Major Asian Trade Partners
10.1 Introduction 131
10.2 China 131
10.2.1 Lessons from Chinese Industry 133
10.3 Thailand 133
10.4 Malaysia 134
10.5 Korea 135
10.6 Energy Efficiency Standards and Labeling: International Scenario 135
10.6.1 China 136
10.6.2 India 137
10.6.3 Thailand 138
10.6.4 Malaysia 139
10.6.5 Korea 139
Chapter 11 Conclusions and Recommendations
11.1 Policy Guidelines for Skill Development and Training of Manpower 141
11.2 Infrastructure Development 142
11.3 Raw Material, Components & Machinery 142
11.4 Building a Global Supply Chain Network 144
11.5 R&D and Technology Upgradation 144
11.6 Implementation of Quality Standards and Energy Efficiency 146
Standards labeling programme
11.7 FDI in Light Electrical Sector 146
11.8 Policy of Disposal of e-waste 147
11.9 Fiscal Incentives 147
11.10 Changing character of Refrigeration Manufacturing in India 148
11.11 Market Segmentation 149
11.12 Quality and Price Discrimination 149

11.13 Customer Relationship Management 150
11.14 Labour Relations 150

11.15 Productivity Enhancement for Raising Profit Margins 150

11.16 Contract manufacturing 150

References 151
Annexure 153-177
Study Team 178

LIST OF TABLES
Page No

2.1 Growth drivers of Consumer durables 10
2.2 Foreign Trade and Domestic consumption of Air Conditioners- 16
India
2.3 Major Players / Manufacturers in India based on Market Share - Air 16
Conditioner
2.4 Foreign Trade and Domestic consumption of Refrigerators- India 19
2.5 Major Players / Manufacturers in India based on Market Share - 19
Refrigerator
2.6 Foreign Trade and Domestic consumption of Washing Machines- 22
India
Washing Machines
2.8 Foreign Trade and Domestic consumption of Vacuum Cleaners- 23
India
Vacuum Cleaners
2.10 Domestic Electrical Appliances (All Categories)- Financial 25
Aggregates
2.11 Refrigerators and Air Conditioners – Financial Aggregates 26
3.1 India’s Revised offer list for ASEAN under AI-FTA dated 7th Feb 35
2008
3.2 Year on Year Growth in Secondary Sector 37
4.1 Characteristics of Registered Air Conditioning Industry in India 39
4.2 Growth of Organized Air Conditioner Sector 40
4.3 Productivity Estimates for Labour and Capital Inputs 41
4.4 Labour, Capital and Total Factor Productivity Growth 42
4.5 Index of Labour , Capital and Total Factor Productivity Growth 42
Rates
4.6 Characteristics of Refrigerator Sector in India 44
4.7 Growth of Organized Refrigerator Sector 45
Rates
4.11 Characteristics of Washing Machine Sector in India 48
4.12 Growth of Organized Refrigerator Industry 49

Rates
5.1 Segment wise Export of Home Appliances – India Total 54
5.2 Segment wise Import of Home Appliances – India Total 55
5.3 Product Segment wise Export-Import Ratio of Home Appliances 56
5.4 Export of Other Window/Wall Types Self-contained Air 57
Conditioning Machines
5.5 Import of Other Window/Wall Types Self-contained Air 58
5.6 Trade Ratio of Other Window/Wall Types Self-contained Air 58
5.7 Country wise Export of Split System Air Conditioning Machines 59
5.8 Country wise Import of Split System Air Conditioning Machines 59
5.9 Trade Ratio of Split System Air Conditioning Machines 60
5.10 Country wise Export of Refrigerator (Household Compressor type 61
refrigerator)
5.11 Country wise Import of Refrigerator (Household Compressor type 61
refrigerator)
5.12 Trade Ratio of Refrigerator (Household Compressor type 62
refrigerator)
5.13 Country wise Export of Refrigerator (Other Household type 63
refrigerator)
5.14 Country wise Import of Refrigerator (Other Household type 64
refrigerator)
5.15 Trade Ratio of Refrigerator (Other Household type refrigerator) 64
5.16 Country wise Export of Other Machines, dry linen capacity <= 10kg 65
5.17 Country wise Import of Other Machines, dry linen capacity <= 10kg 66
5.18 Trade Ratio of Other Machines, dry linen capacity <= 10kg 66
5.19 Country wise Export of Other Machines, with Built-in centrifugal 67
drier of a dry linen capacity not exceeding 10kg
5.20 Country wise Import of Other Machines, with Built-in centrifugal 68
drier of a dry linen capacity not exceeding 10kg
5.21 Trade Ratio of Other Machines, with Built-in centrifugal drier of a 69
dry linen capacity not exceeding 10kg
5.22 Country wise Export of fully automatic machines of dry linen 69
capacity <=10 kg
5.23 Country wise Import of fully automatic machines of dry linen 70
capacity <=10 kg
5.24 Trade Ratio of fully automatic machines of dry linen capacity <=10 71
kg
5.25 Country wise Export of Vacuum Cleaners 72
5.26 Country wise Import of Vacuum Cleaners 73

5.27 Trade Ratio of Vacuum Cleaners 73
5.28 Country wise Export of Microwave Ovens 74
5.29 Country wise Import of Microwave Ovens 75
5.30 Trade ratio of Microwave Ovens 75
6.1 Distribution of Manufacturing units- NPC Field Survey 77
6.2 Distribution of Manufacturing units- Product category wise 78
Refrigerators
6.3 Refrigerator units surveyed: Statewise 79
6.4 Market share of Refrigerator 80
6.5 Domestic Sales to Total Sales 80
6.6 Local and Foreign Competition 81
6.7 Refrigerator Units: Import 81
6.8 Complete Knock Down (CKD) 81
6.9 Any Government Policies to help growth of Industry 82
6.10 Government Interface with business/private sector 82
6.11 Government friendly towards investor 82
6.12 Clearance to start manufacturing unit in India 82
6.13 Availability and quality of basic Infrastructure in India and 83
Competing Countries
6.14 Taxes and other controls in India and Competing countries 83
6.15 Cost of production in Competing countries 84
6.16 Any effect of Global Financial Crisis on company 84
Air Conditioners
6.17 Air Conditioners units surveyed: Statewise 85
6.18 Market share of Air Conditioners 86
6.21 Import: Responses of Air Conditioners Units 87
Competing Countries
Washing Machines
6.31 Washing Machines units surveyed: Statewise 90
6.32 Market share of Washing Machines 91

6.35 Import: Responses of Washing Machine Units 93
Competing Countries
Vacuum Cleaners
6.45 Vacuum Cleaners units surveyed: Statewise 96
6.46 Market share of Vacuum Cleaners 97
6.49 Import: Responses of Vacuum Cleaner 98
Competing Countries
Microwave Oven
6.59 Microwave Oven units surveyed: Statewise 101
6.60 Market share of Microwave Ovens 102
6.63 Import: Responses of Microwave Oven Units 104
Competing Countries

9.1 Electricity Generations- Target & Achievement (Jan 2009) 125
9.2 Electricity Generations- Target & Achievement (Cumulative period 125
April 2008 to Jan 2009)
9.3 Fuel-wise components of thermal generation 126
9.4 Hydro Energy Generation 127
9.5 Energy content in the Reservoirs – Region wise 128
9.6 Shortfall in Generation 130

ANNEXURE

Page No.

Annexure - 1: Survey Questionnaire 153
Annexure -2 : Format for developing Diagnostic Case 159
Studies
Annexure – 3: India-Thailand Consolidated List of 160
Items for Early Harvest Scheme (EHS)
Annexure -4: Methodology adopted for Partial and 163
Total Factor Productivity Estimations
Annexure -5: List Of Units Surveyed For The Field 166
Study
Annexure-6: Storage Position of Major Reservoirs 169
based Projects in the Country
Annexure-7 : Generation Performance of New Thermal 172
Units during Apr.’08 – Jan’09
Annexure-8 : Statement of shortfall in Generation 175
(April 08-Jan 09) existing Thermal Stations vis-à-vis
Target
Annexure-9: List of Thermal Stations Achieving Higher 177
generation than Target During April 08- Jan. 09

Final Report Productivity and Competitiveness of Light Electrical Industry in India

Executive Summary
It was not until 1992, when the Indian market first began to open up post liberalization, that
the MNCs started taking a closer look at the purchasing power of country’s middle class.
Inevitably, the first thing they saw was the massive volume of this potential market, rather
than its cultural idiosyncrasies. Studies have found that the penetration level of various
appliances in India is fairly low. Refrigerator use is about 18 per cent of the total population,
washing machine 6 per cent, air-conditioner less than 2 per cent and microwave ovens about
1 per cent, which translates into a great potential to tap new consumers. Light Electrical
Industry, particularly the large home appliances sector attracted a number of leading MNC’s
to either start joint ventures or start their fully owned subsidiaries in India.

The Indian consumer durables segment can broadly be segregated into consumer electronics
(TVs, VCD players and Audio systems etc.) and consumer appliances (also known as white
goods) like Refrigerators, Washing Machines, Air Conditioners, Microwave Ovens and
Vacuum Cleaners.

Present study examines the light electrical industry particularly large home appliances
sectors such as Refrigerators, Air Conditioners, Washing Machines, Microwave Ovens and
Vacuum Cleaners based on a detailed analysis of the data from both primary and secondary
sources. During the field interactions and surveys, suggestions have been also sought from
manufacturers, Industry associations, policy makers, experts/professionals, research and
developmental institutions, quality implementation agencies etc., on aspects relating to
productivity and competitiveness of the sector.

Domestic sales of Electrical Appliances at the aggregate All India Level during 2000-01 to
2007-08 reported an annual growth of 7.81 percent during the entire period, however, the
expenses have grown slightly at a lower rate of 6.99 percent per annum. One disturbing fact
been the total expenses are found to be higher than the sales realization.

Most of the segments in this sector are characterized by intense competition, emergence of
new companies (especially MNCs), joint ventures and introduction of state-of-the-art models,
price discounts and exchange schemes. MNCs continue to dominate the Indian consumer
durable segment.

World trade has definitely grown since the signing of WTO Agreements in 1995 thereby
giving indicators that international trade reforms do play an important role in boosting
economic development of various countries. But there are several problems facing these
Multilateral Trade Agreements. Predominance of developed nations in negotiations
extracting more benefits from developing and least developed countries. Currently India tops
the list of Asian countries with 30 FTAs, of which eight are with the integrating Asian region,
while and 22 are outside of Asia. It is a matter of concern that over the $8 billion trade deficit

National Productivity Council i


that India has with South East Asian Nations (ASEAN), as India’s exports to ASEAN is worth
only $16 billion, while ASEAN’s exports to India is to the tune of $24 billion. India’s trade
with Singapore is more balanced, with India’s exports to that country worth $7 billion and
imports of $8 billion. Indo-Thai Free Trade Agreement (FTA) was to the first of India’s FTAs
with another ASEAN country while negotiations with Singapore began almost at the same
time.

The Light Electrical Industry is highly capital intensive and also the obsolescence is very
high. Domestic industry is competing with global players from countries like China,
Malaysia, Thailand and South Korea having the path breaking technologies by their side.
There is an imperative to continuously upgrade manufacturing facilities in line with the latest
technological developments for which a suitable R&D infrastructure need to be in place.
Importing is considered to be a cheaper option than manufacturing locally by many domestic
appliance manufacturers in India.

Indian manufacturers are not able to compete with global majors due to the high level of
technological knowhow and R&D content. Fiscal incentives like rationalization of tariff on
raw materials and capital goods, lowering of excise duty on components, introduction of
Value Added Tax (VAT) etc., in conjunction with free environment to the manufacturers,
speed of business, proper communication, power supply, strong engineering and design base,
adequate R&D facilities etc., are key to a successful and competitive domestic electrical
industry.

Earlier Refrigeration industry was mainly operating at the local level not having much brand
value and brand availability. However, recently the character of the market got changed as
the 90 percent manufacturing has come to the organized sector with high brand value while
only 10 percent remains at the local level. The cost difference between the branded and the
local make was in the range of Rs.8000 to Rs. 12000 per piece earlier but the cost difference
came down substantially in recent years. As a result the small manufacturers stopped
production since they are not able to produce high quality durable products at lower cost.
Another area where there is significant change in the character of production has taken place
was that small manufacturers have become channel partners to major producers as
ancillaries or component manufacturers.

Since refrigerators are bulky items, currently about 80-90 percent refrigerators are
manufactured in India. Many multinational manufacturers of foreign origin have set up their
manufacturing plants in India. Currently the domestic value addition is estimated at the level
of 80-90 percent. It has been recommended by the industry associations that different duty
structures can be introduced for different components so that domestic value addition and
employment can be increased.

National Productivity Council ii


Customer Management or Customer Care is a crucial differentiator in the home appliances
industry. Distribution network could be an excellent source of competitive advantage for a
manufacturer of large home appliance. Manufacturers need to build a good after sales
service network, along with strong brand positioning to take care of customers. Consumer
helpline should address the complaints at the earliest. The idea of customer being the King is
the only sustainable strategy.

Manufacturers need to take special care towards efficient utilization of plant and machinery,
reduction in waste etc. It would result in raising the productivity level of the firms and
lowering the cost of production, thereby increasing the profit margins. A part of enhanced
profit may be passed on to the customers through lowering of product prices. Further better
quality, durability and round the clock customer support would enhance the market value of
the domestic producers.

Many Indian entrepreneurs or companies have already started functioning as Electrical
Manufacturing Services (EMS) companies to larger Original Equipment Manufacturers
(OEMs). In this case, OEMs would provide Indian EMS with a full range of services like
contract design, prototyping, final system assembly, configuration, order fulfillment, and
repair and after-market services. Further, being part of OEMs, Indian EMS could be able to
reap other benefits such as research and product development, brand building, sales and
marketing network of OEMs.

Labour policies in India are not favourable for manufacturing as compared to other
competing countries such as China. Therefore, there is requirement of flexible labour policies
to enable manufacturers to restructure labour force in response to market demand. Basic
infrastructure, raw material availability, government policies and R&D need to be updated
and upgraded.

To tackle the factors hindering the productivity and competitiveness of the sector, a number of
strategic initiatives need to be taken up by Industry Associations, manufacturers and
Government. In order to become competitive in the domestic as well as world market, light
electrical manufacturing units need to formulate strategies based on market intelligence,
product development, R&D, demand forecasting and competitive pricing.

The field survey results indicate that the quality manpower availability for the industry is
declining and there is shortage of skilled and trained personnel. The attrition rate is also high
as the industry salary packages are not competitive with ITES sector. The current educational
system and the training institutes are unable to meet the requirement of the sector. Further,
the course curriculum is theoretical and in plant training of students is missing in most of the
institutes.

There is a requirement of Industrial Training Institutes (ITI) and the Course Curriculum of
ITIs should be redesigned and continuously updated and upgraded to meet the changing

National Productivity Council iii


requirement of light electrical industry particularly large home appliances segment. Industry
Associations involvement in developing course curriculum and in plant training should be
made as a compulsory part of course curriculum. Industry/corporate bodies may be
encouraged through tax benefits/ payment of management fee to adopt government run ITI or
diploma colleges for effective and efficient management. Private Engineering / Management
Institutes may be encouraged to run courses specific to industry requirements.

Lack of adequate physical infrastructure such as roads, ports, airports, electricity etc., are
adversely affect the competitiveness and productivity of the domestic home appliances
manufacturing sector. Uninterrupted power supply is a necessary condition for operation
manufacturing units as power fluctuations can lead to major losses to the manufacturing
processes. Moreover, the demand of home appliances such as Air Conditioners,
Refrigerators, Washing Machines, Microwave Ovens and Vacuum Cleaners are driven by the
electrification of homes and uninterrupted supply of electricity in the already electrified
areas.

There is a need for active government support for the survival of domestic home appliances
manufacturing in India as suggested by industry associations. A time bound plan to upgrade
physical infrastructure needs to be prepared. Adoption of Private–Public–Partnership (PPP)
model can facilitate faster and cost effective development of infrastructure. Financial
incentives may be given to manufacturing units for establishing and maintaining of backup
power units and for utilizing non-conventional energy sources.

Weak supply chain network and lack of vendor support also affects the quality, productivity
and competitiveness of the sector. There should be hassle free import of raw material and
components by streamlining the import policy and systems and through simplification of
import procedures. Maritime Transport is a critical infrastructure for the development of
Logistics and Supply Chain Management. It influences the pace, structure and pattern of
development.

Government should strengthen Research and Development in light electrical manufacturing
sector especially in the applied research like product development through special grants to
leading Research Institutes/Universities and Technical Institutes like IITs/ ITIs. Special
schemes may be formulated to promote the development of Indigenous Technology to reduce
dependence on imported equipments and components. Since the cost of production is high in
India due to low technological levels and poor infrastructure, an appropriate financial
support schemes can be evolved for manufacturing units so that the current level of
technology can be upgraded to global standards. Productivity estimations based on Labour
and Total Factor Productivity Growth rates have been found quite low in the light electrical
sector particularly home appliances segments, there is a need for substantial up gradation of
skill levels and technological knowhow (R&D activities) in this sector for further value
addition at the domestic level.

National Productivity Council iv

Final Report Productivity & Competitiveness of Light Electrical Industry in India

CHAPTER 1
INTRODUCTION
1.1. Background

With the successful completion of the Uruguay Round of negotiations, which marked the
commencement of WTO regime of international trade relations, countries as well as
industry/firms are constantly investing their knowledge/intelligence to evolve strategies to
remain competitive in the global market. In this pursuit of excellence, no country or industry can
afford to remain laggard as the champions are promised huge economic gains, where as the
losers face the dire risk of going out of business. In essence, competitiveness has emerged as the
determinant of winner or loser in the manufacturing scene.

Since, India has been trailing behind Asian neighbours in terms of production, quality and export
of Light Electrical Industry products, performance levels of most of factors of production such as
quality manpower, capital investment, infrastructure, technology etc., need to be enhanced
through conscious policy interventions and managerial action to boost competitiveness of this
sector. In this context, an attempt has been made to understand the productivity and
competitiveness of light electrical manufacturing in India with a view to document, identify and
recommend policy solutions to make the sector internationally competitive. The study also
attempts to identify the factors hindering the progress of the sector and suggest measures for
enhancing the competitiveness of the sector.

A wide range of products such as air conditioners, refrigerators, washing machines, microwave
ovens, vacuum cleaners, dish washing machines apart from household electrical appliances,
electrical fans, electrical lamps, storage batteries, dry cells and others are covered within the
ambit of Light Electrical Industry sector. Besides these items, light electrical industry also covers
electric wires and cables industry, transmission line towers, cranes, lifts & escalators, dairy
machinery industry, food processing machinery, packaging machinery industry, water pollution
control equipment, air pollution control equipment etc.

Domestic electrical appliances are now increasingly being used in the household and, therefore,
it is very important that safety and quality aspects of these products need special attention.

National Productivity Council 1


Government has introduced compulsory Bureau of Indian Standards (BIS) marking with respect
to certain electrical appliances like stoves, plugs and sockets. Greater consumer awareness about
the quality and safety of these goods will go a long way in ensuring that manufacturers adhere to
these standards.

Since the industry covers a large number of diverse product categories which cannot be covered
in a single study, present study limits its scope to large home appliances only. Among the large
home appliances, the study focuses on five large home appliances such as Refrigerators, Air
Conditioners, Washing Machines, Microwave Ovens and Vacuum Cleaners. The biggest
attraction for light electrical industry manufacturers in the world is the growing middle class in
India which is, equated by many, to the size of European market in terms of purchasing power.
With Domestic Electrical Appliances (DEA) characterized by low household penetration,
international brands have an edge over their Indian counterparts in terms of superior technology
combined with a steady flow of capital, while domestic companies compete on the basis of their
well-acknowledged brands, extensive distribution network and an insight into local conditions.

Sales of household domestic electrical appliances in India posted strong growth in the recent
years as the Indian economy recorded sterling growth and personal disposable income levels
increased. Intense competition among manufacturers, influx of Chinese brands, and
rationalization by manufacturers to offer products to cater to the middle and lower-middle class
has kept up pressure on unit prices - particularly for air conditioners and refrigerators. Appliance
manufacturers, having understood the need to localise products for the Indian household strived
to introduce new features and technologies that would appeal to the Indian consumer.
Refrigerators with a separate compartment for onions and fresh herbs, washing machines that
utilise less water, and Microwave ovens designed for Indian style cooking are becoming more
common.

In view of the above, National Productivity Council (NPC) undertakes an in-depth analysis and
study on the sector particularly the large home appliance such as Air Conditioners, Refrigerators,
Washing Machine, Microwave Ovens and Vacuum Cleaners in order to evolve strategies to
promote Indian companies and increase domestic value addition. The study has been sponsored
by Department of Industrial Policy and Promotion (DIPP), Ministry of Commerce & Industry



with a view to come out with meaningful policy recommendations to increase domestic value
addition by Indian manufacturers.

1.2. Objectives of the Study

The study is carried out with the following major objectives:

1. Prepare a baseline report on the Light Electrical Industry sector in India.
2. Delineate major strengths and weaknesses of Indian light electrical sector especially
Large Home Appliances using SWOT analysis.
3. Estimate productivity and competitiveness of the sector vis-à-vis major overseas
competitors such as China, Thailand, Malaysia and Korea.
4. Evolve strategies to increase the production and export potential of the sector.

1.3. Terms of Reference

The study is carried out in accordance with the following Terms of Reference focusing on Large
Home Appliance segment of Light Electrical Industry:

1. Study and document the structure of diverse Light Electrical manufacturing sectors in
India.
2. Undertake a SWOT analysis of the Light Electrical Industry sector focusing on Large
Home Appliances segment.
3. Analyze factors constraining the growth of the sector including internal factors such as
availability of electrical power etc.
4. Study the productivity & competitiveness of the Large Home Appliances segment during
the last ten years.
5. Identify and study the competitive advantage of major overseas units/clusters who are
having substantial market share of Large Home Appliances such as Refrigerators, Air
Conditioners, Washing Machines, Microwave ovens and Vacuum Cleaners in domestic
market.
6. Develop Unit specific case studies for each of the major product categories listed at
TOR 5 above. Endeavour would be to highlight one case each from successful as well as
failure categories.
7. Identify the support measures needed by the domestic manufacturing units from the
sector to increase the present market share in the wake of intense competition arising



from international brands originating from countries such as China, Thailand, Malaysia
and Korea.

1.4. Methodology

A study on Light Electrical Industry focusing on Large Home Appliances necessarily required
pooling of technical expertise not only from NPC but also from the industry and its associations,
government and domain experts. Hence for the conduct of the study a suitable team has been
constituted as follows:

• A multi disciplinary team of consultants have been drawn from economics, industrial
engineering, energy, finance, management, IT etc., for conducting the study.
• Eminent experts from the field also are included in the study team.
• NPC Study team is headed by Shri. Brijesh Kumar IAS (Retd.) formerly Secretary,
Department of Information Technology, Government of India.
• A number of eminent experts from the concerned industry and industry associations are
also consulted from time to time on various aspects during the course of the study.

The study has been undertaken in two broad phases.

First phase of the study included preparation of a detailed baseline Report on the basis of
secondary sources of data and literature. The study focused on an in-depth study of the present
competitive environment in the aftermath of the opening up of the Indian economy and its
impact on domestic light electric manufacturers especially Large Home Appliances category.
Besides, the study team analyzed all available published and unpublished literature and data over
the years with a view to gauge the growth and development of selected product categories in
terms of sales volume and manufacturing practices.

The study also focused on the overall policy environment and the productivity and
competitiveness of the domestic brands both in the domestic and export markets. Special
emphasis has been given to analyze the impact of WTO agreements in the relative performance
of the sector in the recent years.

The available research studies on the sector have been referred while arriving at suitable
analytical framework including SWOT analysis of the sector. Apart from the detailed study of



literature, the study team compiled published industry specific data from various official and
company sources.

The compiled data from different sources such as CMIE, DGFT, ASI etc., have been used for the
estimation of productivity and export competitiveness of the sector. Relevant data published by
Annual Survey of Industries on the light electrical sector has also been consulted.

Second phase of the study focused on discussions with industry associations and detailed field
survey of the manufacturing units for which data has been collected from randomly selected
units located at major production clusters in the country. Similar field level discussions have
been carried out at two major competing overseas countries (Thailand and China) for identifying
the comparative edge over India in terms of guiding factors such as cost, quality, price,
technology, policy etc. Deliberations are also held with industry associations at respective
countries on the aforesaid aspects. Since similar cooperation could not be received by the study
team from the other competing countries such as Korea and Malaysia, efforts have been made to
find out their relative competitiveness vis-à-vis Indian manufacturers based on data and
information compiled from internet sources.

A sizable number of manufacturing units from each product category has been contacted for the
detailed field survey in India through a structured questionnaire to find out segment-wise specific
productivity and competitiveness parameters for the sector (Annexure 1). The study covered
detailed field surveys based on purposive sampling of at least 10 units each covering all the five
product categories such as Refrigerators, Air Conditioners, Washing Machines, Microwave
ovens and Vacuum Cleaners. The field survey in Indian covered 70 Manufacturing units.
Adequate care has been taken to include both successful as well as not so successful cases in the
selected sample. Major manufacturing units from each of the product categories are selected for
detailed study and survey.
The compiled data has been analyzed using SPSS software for drawing inferences on the factors
such as productivity and competitiveness of the sectors.

The study also included diagnostic case studies of 10 manufacturing units (equal number of
successful and not so successful) selected from each of the product categories for identifying unit
specific problems. The diagnostic case study has been carried out through a check list



(Annexure 2). The study focused on unit specific problems such as logistic problems,
technological problems, market access issues, finance, employment etc., with a view to find out
unit specific issues confronting the industry in achieving competitive edge.

1.5. Limitations

• Originally the study was scheduled to be completed within six months time period.
However, due to number of extraneous factors beyond the control of the study team such as
General Elections to 13th Lok Sabha during April and May 2009 most of the industrial
associations and manufacturing units were reluctant to cooperate with the field surveys.
Hence the field surveys had to be re-scheduled leading to delay in completion of study.

• Responses from the Industrial associations from overseas countries such as Thailand,
Malaysia , China and Korea was equally evasive, hence the study team had to resort to
alternate methods to compile most of the information from those countries. After a lot of
persuasion, Thailand Electrical and Electronics Industry and Thailand Productivity Council
facilitated a limited field study at Thailand. Similarly field study exercise was also carried
out at selected locations in China by NPC study team with the help of FICCI and Chinese
Chamber of Commerce & Industry. However, the field study was limited due to the non
co-operation of Chinese Industry to share manufacturing related information and data.
Therefore, the field study was mainly based on discussions with Chinese Chamber of
Commerce & Industry and discussions and visits to certain manufacturing units.

• Since the present study had to be carried out with the involvement of a number of external
experts and field survey agencies apart from NPC consultants, substantial finances required
for successful implementation of the project. Disbursement of additional 50 percent of the
project cost apart from the initial 10 percent took place only in September 2009, which also
contributed to delays in undertaking field surveys both in India and abroad.



CHAPTER 2
LIGHT ELECTRICAL INDUSTRY: LARGE HOME
APPLIANCES SEGMENT
2.1. Light Electrical Industry in India

Driven by a young population with increasing disposable incomes and easy finance options, the
consumer market in India has been throwing up staggering figures. However, the rupee income
classifications by themselves do not present a realistic picture of market potential for a foreign
business enterprise, because of significant differences in purchasing power parities of various
currencies. In fact, the Indian rupee has very high purchasing power parity as compared to its
international exchange value. For instance, while the exchange rate of one US dollar is 48.50
Rupees, the domestic purchasing power of a US dollar in the US is closer to the purchasing
power of Rs 6 in India, for equivalent needs and services. As a result, India ranks fifth in the
world, on purchasing power parity terms, despite having low per capita national income (US$
340 per capita).

It was not until 1992, when the Indian market first began to open up post liberalization, that the
MNCs started taking a closer look at the purchasing power of country’s middle class. Inevitably,
the first thing they saw was the massive volume of this potential market, rather than its cultural
idiosyncrasies.

The Indian consumer durables segment can broadly be segregated into consumer electronics
(TVs, VCD players and audio systems etc.) and consumer appliances (also known as white
goods) like refrigerators, washing machines, air conditioners (A/Cs), microwave ovens and
vacuum cleaners.

Most of the segments in this sector are characterized by intense competition, emergence of new
companies (especially MNCs) and introduction of state-of-the-art models, price discounts and
exchange schemes. MNCs continue to dominate the Indian consumer durable segment.

In consonance with the global trends, over the years, demand for consumer durables has
increased with rising income levels, double-income families, changing lifestyles, availability of



credit, increasing consumer awareness and introduction of new models. Products like air
conditioners are no longer perceived as luxury products.

2.2. Growth of Durable Products Market in India

Source: Ministry of Information and Technology, Government of India

The biggest attraction for MNCs is the growing Indian middle class. This market is characterized
with low penetration levels. MNCs hold an edge over their Indian counterparts in terms of
superior technology combined with steady flow of capital, while domestic companies compete
on the basis of their well-acknowledged brands, an extensive distribution network and an insight
in local market conditions.

One of the critical factors that influence consumer durable demand is the government spending
on infrastructure, especially the rural electrification programme. Given the government's
inclination to reduce spending, rural electrification programmes have always lagged behind
schedule. This has not favoured durable goods manufacturers till now. Any incremental spending
in infrastructure and electrification programmes could spur growth of the consumer durable
industry.

Apart from steady growth in personal disposable income gains, consumer financing has become
a major driver in the consumer durables industry. In the case of more expensive consumer goods,
such as refrigerators, washing machines, colour televisions and personal computers, retailers are



joining hands with banks and finance companies to market their goods more aggressively.
Among department stores, other factors that support rising sales include a strong emphasis on
retail technology, loyalty schemes, private labels and the subletting of floor space in larger stores
to smaller retailers selling a variety of products and services, such as music and coffee.

Rising disposable income and declining prices of durables have resulted in increased volumes.
An increase in disposable income is aided by an increase in the number of both double-income
and nuclear families.

A recent study conducted by The Economist analyzed the growth trends in consumer electronics
segment. One of the product categories taken up for study was refrigerators. The sales has been
found increasing from 42,30,000 units in 2005 to 55,05,000 units in 2008 and it is expected to
grow to 65,42,000 units of refrigerator by 2010. Consumer durables are expected to grow at 10-
15 per cent in 2007-08, driven by the growth in CTV’s and air conditioners. Value growth of
durables is expected to be higher than historical levels as price decline for most of the products
are not expected to be very significant. Though price declines will continue, it will cease to be
the primary demand driver. Instead, the continuing strength of income demographics will support
volume growth.

Fig 2.1: Sales trend and future projection of consumer electronics segment

Source: Intelligence Unit, The Economist



Another study analysed the major drivers of growth for various consumer durable products such
as Air Conditioner, Refrigerators , Colour televisions and Washing Machines (Table 2.1). It is
reported that reduction in price and increasing disposable income are the major drivers of
growth.

Table 2.1: Growth drivers of Cosumer durables

2.3. Large Home Appliances Segment

2.3.1. Preferential Government Policies

Consumer electronics and appliances manufacturers expect strong growth in the fiscal 2009-10
due to buoyant demand, concessions proposed in the Budget and improved consumer sentiment.

“The growth of the consumer electronics and appliances industry in the first quarter of the
current fiscal was about 10-12%, much better than last year (8%),” according to the Industry
Association for Consumer Electronics and Appliances Manufacturers Association. Factory
output data for May, showed that production of consumer durables grew by as much as 12.4%,
compared with 2.8% in the same month last year. The index of industrial production grew by
2.7% in the month.



In the three months ended June, sales of refrigerators and air conditioners (ACs) rose
significantly compared with the same period last year. “In the case of refrigerators, the growth
was not much in January to March 2009, but after March the growth has been about 5-7%. ACs
has grown 8-10%. Favourable decisions by the government have helped boost consumer
confidence, among other reasons,” said Vice President, sales and marketing, appliance division,
Godrej and Boyce Manufacturing. Co. Ltd.

Consumer Durable manufacturers need to invest Rs.1,000 crores on promotions, raising capacity
and R&D. Consumer durables manufacturers such as LG, Samsung, Whirlpool and Godrej &
Boyce to line up investments amounting to about Rs.1,000 crores over the next few months for
product launches, research and development (R&D) and for upgrading capacity at their existing
manufacturing plants.

Each of these companies are investing in the range of Rs. 100 crores and Rs. 500 crores. Godrej
& Boyce, for instance, will invest around Rs. 100 crores in its plants at Punjab, Maharashtra and
Uttaranchal. The funding will be through internal accruals. "March and April have been very
good for the industry. We have overcome three issues — liquidity crunch, credit crunch and lack
of confidence. The confidence is returning," said Godrej & Boyce's Chief Operating Officer
(appliance division).

LG India, on its part, plans to invest Rs 500 crore in R&D activities as well as on advertising
home appliances during 2009-10. "LG is looking to double the amount of investments done in
R&D to Rs 400 crore and spend Rs 100 crore on advertising and marketing of home appliances,"
said LG Electronics India's Managing Director. Currently, LG has two manufacturing units in
India one at Greater Noida (near Delhi) and the other at Ranjangaon in Pune, which would be
expanded in the next three years. The company may set up another unit by 2012 as a part of its
plans to augment manufacturing capabilities.

Whirlpool had recently effected 4-5 per cent price reduction in its refrigerator offerings, which is
expected to help boost sales. The company would invest more than Rs 300 crore in product
development and promotion over the next three years. It expects a 10 per cent top line growth
during the current fiscal, while the same would touch 25 per cent during the year 2010-11.



Samsung, too, has planned an investment of Rs 100 crore to increase the capacity of its Noida
facility. The company is looking to strengthen its portfolio with a new range of air conditioners,
refrigerators and washing machines.

The Consumer Electronics and Appliances Manufacturers Association (CEAMA) estimate the
size of the industry at Rs 30,000 crore. However, the penetration level of various appliances in
India is fairly low. Refrigerator use is about 18 per cent of the total population, washing machine
6 per cent, air-conditioner less than 2 per cent and microwave ovens about 1 per cent, which
translates into a great potential to tap new consumers.

Major players in this segment are LG, Panasonic, Onida , Samsung, Godrej & Boyce and
Whirlpool have individually introduced a host of new technology and star-rated products across
washing machines, refrigerators, televisions and air conditioners this year.

While Samsung introduced 47 new products in these categories, Godrej & Boyce introduced 13
new air-conditioners and direct-cool range of refrigerators.

2.3.2. India to enforce energy efficiency in climate fight

India will make energy efficiency ratings a must for electric home appliances, including air
conditioners and refrigerators, from January 2010, stepping up domestic efforts to fight climate
change.

Energy efficiency is a key focus in India's national climate change policy, unveiled last year and
which lays out a roadmap to a green economy but doesn't fix a target for carbon emissions. The
government hopes to save 10,000 megawatts of power by efficient use of energy by 2012.

A top climate official said India would unveil a trading scheme centered on energy efficiency
certificates that could possibly expand to renewable energy. The plan involves creating a market-
based mechanism that would allow businesses using more energy than stipulated to compensate
by buying energy certificates from those using less energy or using renewable energy.



The government is setting up energy benchmarks for each industry sector. Companies that do not
meet the benchmarks would have to buy these certificates under a reward and penalty system.
Most firms in India, which is Asia's third-largest economy and the fourth-largest emitter of
planet-warming carbon dioxide, have yet to plan for the impact of climate change and do not
measure emissions or have deadlines to curb them, according to studies.

2.3.3. Air Conditioners

In 1902, Dr. Willis Haviland Carrier invented and secured the patent for a weather control
concept - air conditioning. Ever since, life hasn't been the same. The air-conditioner market is
heating up as more and more people appear to be convinced about the comfort of an air-
conditioner (AC). The extremely hot summers have stirred the demand for ACs and the industry
is experiencing a significant change.

Growth in the white goods segment was largely driven by the Air-conditioner (AC) segment.
Within this, split ACs have been the main growth drivers, recording a growth of over 90 per cent
in 2006. Growth, albeit at a slower rate of 32 per cent, has also been experienced in the segment
of window ACs. The window AC segment is slightly less organised as compared to split AC
segment. The market for air-conditioners is divided quite uniformly across customer segments,
with about 45 per cent share for private sector corporate, 20 per cent for domestic use, 15 per
cent each for public sector companies and government use and 5 per cent for hospitals. Air
Conditioners generally refer to Room Air Conditioners as distinct from Central Air Conditioning
Plants. Room Air Conditioners market is segmented into Window AC (WAC) and Split AC.
Now with the limitation of space and scarce availability of window space and also to reduce the
noise in a room, the Split AC is gaining popularity.

Also split AC has come into prominence due to export orders from abroad. Technologically the
Indian Window Air Conditioner Industry has come a long way and is now at par with
international level. Import of capital goods for the manufacture of non-CFC refrigerator and air
conditioners are allowed duty free.



2.3.3.1 Types of Air-Conditioners

Air conditioning products are divided into Non Ducted products & Ducted systems .The Non
Ducted products are divided into two parts: window ACs & the mini splits. The ducted systems
are divided into central plants, packaged ACs and ducted ACs. Window ACs account for about
54% of the total market for ACs with an estimated market size of about Rs20 billion. Room air
conditioners operate on electricity or gas and are enclosed in a single cabinet. They blow the
conditioned air directly into the room and do not have air ducts leading to and from them. The
three chief types are window air conditioners, consoles and self-contained air conditioners.
Window air conditioners fit into the lower part of a window and can be moved from window to
window and thus the name, Window ACs. Self-contained air conditioners are the large room air
conditioners. Central air conditioners also use electricity or gas. They can supply conditioned air
to a number of rooms or to an entire building from one central source. Fans blow the conditioned
air through air ducts from the air conditioner to the rooms. Central conditioners have a number of
advantages over other kinds. For example, all the equipment for air conditioning is located in one
place. This reduces the cost of cleaning and repairing. Central conditioners can also be zoned i.e.
they can supply air of different temperature to different parts of a building.

2.3.3.2 Penetration in India and Competing Countries

According to Refrigeration and Air-conditioning Manufacturing Association (RAMA) the
penetration of household Air-Conditioners is abysmally low in India at around 2% as compared
to 20% in Indonesia, 24% in China, 40% in Thailand, 45% in Malaysia.

2.3.3.3 Players and Market Share

The size of the room Air-conditioners industry is estimated at 1.1 million in volume terms, and
Rs 24 billion in value terms. According to FICCI, Indian AC industry which is mainly dominated
by players like Carrier and Voltas has been taken over by the new MNCs in the last few years.
AC market is dominated by four major players—LG, Voltas, Carrier and Samsung. LG is the
market leader with a market share of 29 per cent followed by Voltas (11) and Carrier and
Samsung (9.2 each) in addition to other players like Hitachi and Videocon.



Company Brands
Mirc Electronics Limited Onida
Videocon International Limited Videocon
LG Electronics India Limited LG
Samsung India Electronics Limited Samsung
Whirlpool of India Ltd Whirlpool
Godrej & Boyce Mfg. Co. Ltd. Godrej
Voltas Limited Voltas
Electrolux Kelvinator Electrolux
Blue Star India Ltd Blue Star
Daikin Industries, Ltd. Daikin

Market Share (Segmentation), ACs India in 2006
Private Sector 25%
Domestic 20%
Corporate 20%
Public Sector 15%
Government 15%
Hospitals 5%

Market Segment, AC India, 2006

Unorganised
type

Organised

0 20 40 60 80 100
per cent

Windows Split



Table 2.2: Foreign Trade and Domestic consumption of Air Conditioners – India
(Rs. Crores)
Year Export Import Trade Domestic Domestic Sales
Ratio Consumption (Value)
(Value)
2002-03 94 330 0.28 2430 2194
2003-04 205 473 0.43 2920 2652
2004-05 216 715 0.30 3697 3198
2005-06 180 914 0.20 4794 4060
2006-07 198 1278 0.15 6100 5019
2007-08 253 1819 0.14 8403 6837

Table 2.3: Major Players/ Manufacturers in India based on Market Share - Air Conditioner
(%)
Name of the Company 2002-03 2005-06 2007-08
Blue Star 14.53 16.51 17.98
Voltas 12.12 11.95 14.11
L G Electronics India Pvt. 13.54 18.85 13.2
Samsung India Electronics Pvt. 3.93 7.01 6.88
Total 44.12 54.32 52.17
Source: CMIE, Industry Market Size and Share, April 2009

2.3.4. Refrigerators
Refrigerators are one of the most sought after home appliances in Indian middle class homes. The
refrigerator market has two segments: Direct Cool and the relatively new Frost-Free type. The
market for refrigerators in 2006-07 was about 6.5 million units. The growth of refrigerator segment is
projected to be between 18 to 22 per cent over the next 5 years. A critical success factor for the
refrigerator market, given its widespread use, is deeper reach into the market and increased
penetration. Recently, the market is getting reinforced by the replacement segment as well.

Indian refrigerator industry has become highly competitive as many global brands have entered
the market and the consumer has a wide choice. Refrigerators are presently manufactured in two
basic designs, which are referred to as Direct Cool (DC) and Frost Free (FF) refrigerator.
Manufacturers of refrigerators claim to have improved the quality of the product particularly the
reliability of the compressor. Quality products, with superior technology have helped the
industry to achieve higher growth in term of value and also higher realization in value terms.



In so far as new technology is concerned, the concept of Frost Free refrigerator has been gaining
popularity. Capacity wise also, there is a shift in refrigerator market. Till about two years back,
165 litres had a larger share and now units of capacity 185-300 litres are having increasing
market share. Manufacturers are encouraged to adopt environment friendly technology like usage
of non-CFC refrigerant based air conditioners, non-CFC refrigerators are manufactured in the
country but because of their high initial cost, the demand is somewhat sluggish. Refrigerators in
India are inevitability keeping in mind the tropical climate of India. More than 8 months of the
year, 90% India face hot humid weather. And hence, Refrigerators are used in almost all
households. Sale of Refrigerators In India has touched new heights in the recent years as the
living standards of the masses have improved and Refrigerator prices have become more
affordable. Refrigerators for Home as well as Industrial use can be bought for amount starting
from less than Rs. 20,000 to over Rs. 1,10,000. Refrigerators with/without Freezers and separate
Freezers are also available with the Retail Stores. The types of refrigerators available in the
Indian market are:

Bottom Freezer Refrigerators
Compact Refrigerators
Counter Depth Refrigerators
Freezer Less Refrigerators
Side-By-Side Refrigerators
Top Freezer Refrigerators
Wine Coolers
Freezers

The Best Buy ones are mainly the Bottom Freezers one and the Small Refrigerators. The
Consumer Reports show a sharp rise in Online Sale of refrigerators as well. The Indian buyers
have become smarter and prefer the Best Deals giving them complete value for money. They
seek complete information about the Refrigerators At Best Buy Prices as well as reports on
Refrigerator Reliability from the Reviews and Ratings available on many websites. Comparisons
between Refrigerators are made on the basis of the utility features like:

Size and Dimensions - Small or large
Energy Efficient
Capacity ranging from less than 200 liters to above 350 liters depending upon use



Freezer capacity ranging from less than 50 liters to over 100 liters
Defrosting system which can be automatic, semi automatic, frost free or cyclic
The number of doors.

Many Electronic Appliances stores In India offer special festive Discount and Best Buy Deals.
Most of them also provide Maintenance and Troubleshooting services in case the customer faces
any problems with the Refrigerator use. Some of the manufacturers like LG, Samsung,
Whirlpool, Godrej, Videocon and Electrolux also have authorized Service Centers In all parts of
India for their Refrigerators. Some shopkeepers also deal in Wholesale of New or Used
Refrigerators and Spares where one can get Cheap Deals. The Life Span of the Used
Refrigerators may vary with their previous Use and Maintenance. Refrigerators with Built-In or
No Freezers and genuine Stainless Steel Spare Parts are also available with the local dealer or
with the company Service Centers.


The refrigerator industry has become highly competitive as a number of brands have entered the
market and the consumer has a wide choice. Some of the leading companies in the Refrigeration
manufacturing and their brand names are given below.

Company Brands
Videocon International Limited Videocon, Akai
Whirlpool of India Ltd Whirlpool
Voltas Limited Voltas
Electrolux Kelvinator Electrolux Kelvinator, Electrolux
and Allwyn

Refrigerators constitute the second largest product segment within the Indian consumer durables
sector in India, with an estimated annual turnover of Rs 39 billion during FY2005 with an
estimated sale of 4.1 million units. According to FICCI Survey April-March 2003-2004
Whirlpool and Godrej are the top two players with market shares of 27 per cent and 20 per cent
respectively. Electrolux Kelvinator and LG compete for third and fourth position with market



shares of 16 per cent and 14.5 per cent respectively. Videocon (11 per cent), Samsung (6), BPL
(4), Voltas and Akai are the other significant players.

Table 2.4: Foreign Trade and Domestic consumption of Refrigerators– India
(Rs. Crores)
Year Export Import Trade Domestic Domestic
Ratio Consumption Sales (Value)
(Value)
2002-03 59 103 0.58 2843 2799
2003-04 84 94 0.89 2860 2850
2004-05 77 119 0.65 3242 3200
2005-06 115 74 1.56 3559 3600
2006-07 218 115 1.89 3798 3900
2007-08 347 111 3.12 4064 4300

Table 2.5: Major players/ Manufacturers in India based on Market share – Refrigerator
(%)
Whirlpool of India 28.55 24.36 28.48
Total 52.51 66.22 78.08

2.3.5. Washing Machines
During the last few years, the market for Washing Machines has grown quite fast. It is the fully
automatic segment, which in recent times has been getting the attention of the users especially in
those households where both partners are working. Consequently manufacturers have started
paying more attention to this segment and have started introducing more features in their
products. The customers now have a wide range of world-class brands to choose from.

The sales of washing machines have grown from about 780,000 units to 1,948,000 units during
1999 to 2007 period, registering about 12.2 per cent annual growth. The washing machine
market can be segmented into semi-automatic and fully automatic machines. Semi-automatic
washing machines enjoy a dominant share of 85 per cent. Fully automatic washing machines
have been gaining their share as a consequence of product improvement, competitive pricing etc.
However, semi-automatic machines will continue to play a major role in the Indian market for



quite sometime. Fully automatic washing machines have been growing at 44.5 per cent and semi-
automatic segment, at about 18 per cent. The entry of MNC’s has widened the range to more
than 10 brands with a proliferation of models, while ensuring technology upgradation. A visible
impact of this has been the exit of a few established domestic players from the market.

There is also an increasing demand for purchasing smaller washing machines in the range of 3 to 4 kg
capacity as compared to larger machines as nuclear families are growing. In regard to emerging new
technologies in the washing machine sector, it may be noted that aero power, triple cascade tornado
wash, digital intelligence, unique optical sensor and other such innovations and adaptations which are
being gradually introduced by the indigenous manufacturers. Washing Machines demand in India is
increasing with the changing status of women. It is now one of the basic utilities at home. Most of the
women in modern India are working so there is less time left with them to do the manual washing. The
washing machines really help a lot by speeding up domestic work. The leading names in the sector of
washing machines in India have really lowered the prices of their product thus increasing the sale of
washing machines in India. Their sale further increases during the festival seasons as different
companies offer discount rates and gifts along with washing machines and some of the best deals can
be made. From a very crude look in the beginning it has transformed into very stylish one. Now it
ranges from washing machine to washer dryers with front loading, top loading etc. In earlier times
market for washing machines in India was not very lucrative. Videocon introduced India's first washing
machine in 1988 in collaboration with Matsushita Electric Industrial Co. Ltd, Japan.

With the changing status of women the washing machine in India has also undergone
transformation. From the crude and clumsy look it has metamorphosed into modern and trendy
look. Latest technology also gives an added advantage. Electrolux has launched Walky Talky
Machine in India. The first talking machine has 90 different phrases in Hindi and English that
guide a woman in each step. Samsung has introduced Silver Nano technology in washing
machine that is an anti-bacterial technology. It destroys 99.9% of bacteria, germs and keeps
clothes bacteria free even after 30 days of washing.

Whirlpool is one of the leading brands that has fully automatic and semi automatic washing
machines with different capacities. Godrej prides in having fully automatic, semi automatic and
front-loading washing machine for the cleanest wash. Along with these Hitachi, Haier, IFB,



Kenstar are also giving the best possible washing machines in India. Most of the machines now
have the facility of both washing and drying. Further new brands such as Z-line and Unistar have
been launched from Vishal Retail and reliance retail outlets which are basically Chinese in
origin.

Company Brands
Whirlpool of India Ltd. Whirlpool
BPL BPL
IFB Industries Limited IFB
Hitachi Home & Life Sol. India Ltd. Hitachi
Haier Appliances India P. Ltd. Haier
Toshiba India Pvt. Ltd. Toshiba
Kenstar Kitchen Appliances Ltd. Kenstar

2.3.5.1 Penetration of Washing Machines in India and Global
The penetration level of Washing Machine is relatively low in India as compared to global
levels. Many housewives in less affluent households prefer to wash clothes themselves rather
than invest in washing machines. Water scarcity in many Indian cities and timely availability is
another major issue. However, it is expected that penetration of washing machine will rise by
more than 6 per cent in the next two years.


The refrigerator industry has become highly competitive as a number of brands have entered the
market and the consumer has a wide choice. Some of the leading brands are as follows:

LG Electronics has registered a remarkable growth of 36 % in the Washing Machine Segment in
H1 The Fully Automatic Washing Machines segment has recorded a remarkable performance
where volumes have grown by 22% and value by 25% .Here again LGEIL happens to be the
undisputed leader with a 30.7 % market share in Fully Automatic Washing Machine and 33.7 %
market share in Semi Automatic Washing Machine. (ORG-GFK, May 2004)



Table 2.6: Foreign Trade and Domestic consumption of Washing Machines – India
(Rs.Crores)
Year Export Import Trade Ratio Domestic Domestic
Consumption Sales
(Value) (Value)
2002-03 40 45 0.87 1913 1907
2003-04 39 46 0.84 1945 1937
2004-05 67 70 0.96 2027 2024
2005-06 87 108 0.80 2261 2240
2006-07 33 154 0.22 2512 2391
2007-08 35 232 0.15 2962 2765

Table 2.7 Major players/ Manufacturers in India based on Market share – Washing Machines
(%)
Value Industries 50.01 47.72 38.14
Total 68.04 72.33 66.43

2.3.5.3 Future Scenario

Rising rate of growth of GDP, growth in disposable income, improved lifestyles, rising
purchasing power of people with higher propensity to consume with preference for sophisticated
brands would provide constant impetus to growth of white goods industry. While the consumer
durable market is facing a slowdown due to saturation in the urban market, rural consumers
should be provided with easily payable consumer finances schemes. Rural India, which accounts
for nearly 70 per cent of the total households, has a two per cent penetration in case of
refrigerators and 0.5 per cent for washing machines, offers plenty of scope and opportunities for
the white goods industry. Rural market is growing faster than the urban India now. The urban
market is a replacement and up-gradation market now.



2.3.6. Vacuum Cleaners

Vacuum Cleaners are an emerging segment in the Indian market, still at a nascent stage. The
drivers for demand have been the improvement in life style and higher aspirations of urban
middle class and the top income brackets. While the market has been growing, this segment is
not expected to reach significant volumes soon. Part of this could be attributed to the lifestyle
compatibility of Indian customers with the product. In the large majority of Indian houses, for
instance, floors are not carpeted and the product will have to meet dual requirements of sweeping
and mopping. Another impediment to the adoption of vacuum cleaners has been the availability
of cheap domestic help in most cities.

Table 2.8: Foreign Trade and Domestic Consumption of Vacuum Cleaners – India
(Rs. Crores)
Year Export Import Trade Ratio Domestic Domestic
Consumption Sales
(Value) (Value)
2002-03 2 5 0.33 178 175
2003-04 3 5 0.55 174 172
2004-05 3 9 0.31 182 176
2005-06 3 10 0.31 197 190
2006-07 2 14 0.11 226 213
2007-08 6 28 0.22 216 194

Table 2.9: Major players/ Manufacturers in India based on Market share - Vacuum Cleaner
(%)
Eureka Forbes 61.65 64.58 68.25
Forbes & Co. 30.26 18.58
Total 61.65 94.84 86.83

2.3.7. Microwave Ovens

Microwave Ovens until recently were a rarely found and used Home Appliance in India, but in
the recent years we observe an emerging trend of a OTG or Microwave Oven in almost every
modern Indian kitchen. The Microwave Ovens available in the market are of following types:


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