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| Saturday, April 7, 2001 |
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THE
WTO regime is here, and as the hype on the "opening up of the
economy to make the consumer the king" builds up, the mirage may
also be getting bigger. Beginning from first fortnight of April, with
the license raj almost dismantled, a wide range of "high quality
imported goods" are expected to enter the Indian market. Most
foreign companies see the country, with its large middle class, as a
huge opportunity to sell their goods at "affordable prices"
and are confident that the Indian consumer is in a mood to lap up
whatever is offered. Their estimation may be partly true, but the
"feel good" factor that prevailed after the presentation of
his "dream Budget" by the Union Finance Minister, Yashwant
Sinha, a month ago, appears to have all but evaporated. Political
uncertainty following the tehelka. com disclosures and the stock
market crash appear to have dampened the spirit and the goods may find
few takers. |
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Vipin Gupta of Ludhiana, trading in silk sarees and dress material complained that the slump in the market "is so deep and all pervasive that thousands like me are not able to generate any worthwhile return from investment." The result is that their money is forced to remain idle. This year has been particularly bad. First it was the problem of higher sales tax imposed by the Punjab government which led to a prolonged agitation by the trade and industry. There were incidents of gherao, violence etc against the sales tax staff. The agitation cooled off only after the government withdrew the measure. This was followed by a hike in the electricity tariff which led to another agitation by the industry. The matter was resolved only after repeated rounds of negotiations between the representatives of the industry and the Punjab government, including Chief Minister Parkash Singh Badal. Then came the last straw in the form of the refusal of the Central procurement agencies to purchase Punjab paddy which they said was "below specifications." The standoff between the procurement agencies and the farmers led to a payment crisis, choking money supply in the market which in turn led to a lower volume of sales all around and a lacklustre Divali. Agitated farmers gheraoed mandis, beat up staff of the procurement agencies, blocked major highways besides disrupting railway traffic. An adamant Union Food Minister, Shanta Kumar, refused to give in and relax procurement specifications. The matter was finally resolved at the level of the Prime Minister. But the damage had been done. Uncertainty haunts the Punjab farmer, the biggest grain producer of the country. He is not sure what will happen during the coming wheat procurement season next month and paddy procurement in September-October. There is a talk of "diversification" of crops by getting out of the wheat-paddy rotation. But it is easier said than done. Alternative crops require an elaborate marketing and storage system which will take years to come up. The tight money supply position which earlier cast a shadow on the wheat and paddy procurement operations, is now impacting the milling of paddy. There are complaints by the millers that they have not been paid for the past three months for the rice they custom-milled for the FCI. With a large section of white goods consumers hit by these factors, it is no wonder that the customer has shied away from shops and establishments offering a bewildering variety of goods despite all the allurements in the form of discounts, gifts and prizes. Even attractive finance, never-before gifts have failed to move customers. In a desperate bid to boost business, certain travel agencies have begun to offer trips to the USA, Europe and other exotic destinations in different parts of the world whose cost is recovered from the travellers in installments! As Yogesh Bansal, a businessman of Ludhiana, points out, "Coupled with the shrinking purchasing power of the people, there is also a widespread feeling that the prices of consumer durables will fall shortly when goods are imported freely under the new GATT regime. Cheap imports from China which have already begun to flood the markets in Delhi and elsewhere would grow from the next month. Already, small electronic items, battery cells, decoration pieces, bicycles, fans and TV sets have begun to appear in the markets at much cheaper rates than the Indian goods. A Chinese TCL 21" TV set is available for just Rs 9,000. Fans and bicycles are cheaper. Prices of personal computers (PCs) have taken a tumble. This has only served to whet the appetite of the customers for other goods as well. They expect a substantial fall in prices of items like ACs, microwave ovens, etc. All this has translated into a low sales volume for existing brands of consumers goods like TV sets, coolers, air conditioners, refrigerators, ovens etc. There is little movement in the real estate sector. In most cities of Punjab and Haryana, the sale and purchase of property has remained depressed over the past few years. In cities like Chandigarh, Mohali and Panchkula, property prices have actually fallen. Things are not exactly rosy even in Gurgaon, which is regarded as a prime location because of its proximity to Delhi. So have the rentals, says Amarjit Singh Sethi, a leading property consultant of Chandigarh. A drive through Sectors 48 and 49 of Chandigarh, Mani Majra, Mansa Devi Complex and Panchkula is revealing. Rows upon rows of newly built flats by cooperative societies are lying vacant, awaiting tenants and buyers. Even a decline in prices and rentals has failed to attract customers. Those who used to invest in real estate for re-sale purposes are keeping away because of the stagnant market. And there is little in the immediate future to lift the market sentiment. It is the same story in the stock market. A free fall in the sensex in the Bombay Stock Exchange due to insider trading by unscrupulous brokers, hammering by the bear cartel, the payment crisis in Mumbai and Calcutta have all taken their toll. Thousands, if not lakhs, have lost their money. There have been suicides by heartbroken investors. Trading volumes have gone down sharply in Ludhiana and Chandigarh stock exchanges as well. It is a sombre scenario in the industry too. The hosiery industry of Ludhiana is in the grip of a debilitating payment crisis. According to Anish Dhawan, a leading hosiery manufacturer and exporter of Ludhiana, manufacturers are being held to ransom by retailers who either hold up payments for the goods supplied for months together or return goods without so much as a thank-you. Steel re-rolling mills of Mandi Gobindgarh are also on the downswing. Nowhere is the phenomenon more pronounced than in the automobile sector where sales have not picked up despite a hefty decrease in prices announced by all the car companies following a reduction in excise duty. The fall in car prices was accompanied by handsome "discounts" ranging between Rs 5,000 and Rs 15,000 offered by dealers. Besides cheap finance on attractive terms was also available. Still it failed to bring in customers. As a matter of fact, most car companies seem to be on way to recording their lowest sales at the end of the financial year. One of the factors which seems to be holding the customers away is the expectation of a further decrease in the prices of cars following the availability of second hand imported cars in none too distant future. Only a "threat" of an increase in car prices next month has generated consumer interest. Car dealers in Chandigarh and elsewhere in the region have reported a sudden spurt in enquiries from prospective customers. Some of the enquiries have actually translated into sales. But it remains to be seen if the rise in sales are sustainable.
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