Kerala Traders Look at Onam with Cautious Optimism
Kochi: Onam is the festive season which brings sparkles in the eyes of both consumers and retailers alike. A season which energises Keralites to go on a shopping spree. At least that was the case until a few years ago. But in 2017, the Onam market took a blow, struggling to bounce back from the terrible impact of demonetization. A year later, the situation took a turn for the worse as a result of the devastating floods that hit the State and the confusion among the trading community caused by the sloppy and hasty implementation of the newly-introduced Goods and Services Tax (GST) regime.
During this Onam shopping season, traders are hopeful of making a decent cut, discounting a possible decline in demand owing to the natural calamities in the State. However, looming economic sluggishness is causing concerns among certain sections of businesses
In August this year, the market was hopeful and upbeat about the upcoming shopping season, just after the first anniversary of the catastrophic floods which ravaged a major portion of the State. Most electronics brands felt bullish about the Kerala market; Sony doubled its marketing budget to Rs. 17 crore, Voltas was looking forward to Rs. 50-crore business and Godrej projected a 20 per cent growth in FY20. The market, it appeared, was all set to brighten up. But once again, Mother Nature pushed the people of Kerala to the edge with yet another rain-calamity in little less than a year.
While one can’t help wonder whether it is the beginning of a recurring pattern as a result of climate change, construction activities being carried out in sheer disregard to the nature and deforestation, the moot question as far as the trading community in general and the retail sector in particular is concerned is how bad the situation is and what does the State plan to do to revive the sagging market and the economy in general?
“We are battling a second flood within a year…Now we need a new development culture to save the State. We will take the advice of experts on the causes of these natural calamities hitting the State with such alarming regularity,” media reports quoted Pinarayi Vijayan, the State Chief Minister, as saying.
The Government of Kerala recently introduced Kerala Flood CESS to garner requisite fund to help rebuild the flood-ravaged State. As per the plan, there will be hike of 1 per cent in the price of various commodities which have already been included under the GST slabs of 12, 18 and 28 per cent. According to estimates, the Cess will impact the prices of more than 900 commodities consumed in Kerala. The hike, however, will not be applicable for essential consumer commodities like rice, salt, sugar etc. which have been included in the GST slabs ranging from 0 to 5 per cent. Meanwhile, automobiles like car and bike, electronic consumer goods like refrigerator, television, mobile phone, grinder, washing machine and laptop; construction materials like paint, cement, home décor, and medicines are set to be costlier, among others.
MOBILE PHONE SALES UPBEAT
According to mobile phone retailers, the imposition of Flood CESS of 1 per cent will not make a significant impact on the market. Mobile phone manufacturers like Samsung and Xiaomi are targeting sales turnover of more than Rs. 80 lakh during this Onam, discounting a possible decline in demand owing to the natural calamities in the State. In fact, retailers are expecting dull sales only in some small pockets of the State which were hit by landslides and torrential rains.
“I think mobile phones will remain in top demand this festive season and companies may easily be able to achieve targets,” said a customer executive manager with MyG, a smart phone and accessories retail chain in Kerala. Brands like Samsung, Xiaomi and Vivo are offering top-of-the-line processors at much less value to attract customers this year. “Snapdragon 625 processors have been priced very low this year compared to the previous year. So the customers can buy smarter and efficient devices at much lower prices. With such a move, manufacturers aim to target much larger share of the market,” he added.
Meanwhile, various electronics brands are also looking forward to a great sales season during this Onam by bringing out whole new range of products at attractive prices to woo customers.
“With our commitment of offering world-class products equipped with the latest technology, our Onam offerings with consumer-centric schemes and new line-up aims at enhancing the lifestyle of our consumers and making their purchases worthwhile. We look forward to a great season,” said Robby Joseph, State Head – Kerala & Tamil Nadu, Panasonic India.
Most electronics manufacturers have announced new line-up of home appliances like Washing Machines, Televisions, Refrigerators, and Microwave Ovens. According to Voltas, a electronics brand leader in Kerala, it has garnered close to 23 per cent of the market share. “As a Tata Company and a responsible market leader, we have always placed customer centricity at the heart of all our offerings. Onam is an auspicious time for all of us, and we aim to make it even more special with our exclusive consumer offer,” said Pradeep Bakshi, MD & CEO, Voltas Limited.
On close heels, Godrej Appliances has also stepped up business a notch by offering easy finance and exchange offers. “Kerala is a strategic market for us and we have always enjoyed the support from the consumers of Kerala. We recognize the ever-evolving aspirations of Keralites and are happy to offer products and services to meet their expectations. Onam is the first in the series of festive seasons across India and it sets the tone for the entire nation,” said Kamal Nandi, Business Head and EVP – Godrej Appliances.
AUTOMOBILE SECTOR MARRED BY ECONOMIC SLUGGISHNESS
Although the Union Finance Ministry is downplaying a profound impact of the ‘purported’ economic slowdown in the country, major players in the Non-Banking Financial Companies (NBFC) segment, a very large support system of the automobile sector, claim the sector is facing unprecedented crisis with sales nosediving in the sector.
A manager of Sundaram Finance in Kerala acknowledged the recession gripping the automobile sector as a result of several factors. “Onam season is the time when NBFCs are doing a substantial chunk of their businesses. The transition process from BS4 to BS6 is one factor which causes confusion and anxiety among the customers, contributing to the sluggishness the industry is witnessing,” he said.
ISSUES IN STATE’S TRADE AND COMMERCE
Although the local retailers and traders of Kerala have a lot of expectations about the sales this Onam season, the prevailing economic situation is really impacting the small and medium-scale enterprises. Due to increase in financial liabilities, shop owners are said to be vacating rented spaces in Northern Kerala. Flood CESS on top of hiked taxes imposed by local self-government institutions have been cited as another reason why businesses are not doing well this season.
On the other hand, co-operative banks, which have given substantial amounts as loans, are piling bad-debt challans. “Shop owners who take loans from such banking institutions are not able to repay the loan. It is building up to another crisis in the co-operative banking sector,” a director board member of a Co-operative Bank in Kerala told Destination Kerala.
C E Chakkunny, State President, Kerala Consumer Goods Distributors Association, said that demonetization, Nipah viral infection and recurring natural calamities have completely battered the retail commerce sector in the State. “The situation in Kerala is not comparable to that of any other State in the country. If there is no collective effort to resuscitate the sector, future of retail in Kerala will remain bleak,” said Chakkunny who has been active in the field for the last 60-odd years. He added that businesses cannot bear the burden of increased prices along with additional taxes like Flood CESS. Besides, the remittances from the Gulf countries, which have been a main support for businesses in Kerala, have taken a hit, according to Chakkunny. “Many have relocated to Kerala due to dwindling job opportunities there for expatriates, affecting the State’s economy,” he said. According to economic experts closely monitoring foreign remittances to Kerala, many businesses in Northern Kerala are downing shutters.
On the other hand, Chakkunny pointed out that lack farsightedness in planning road infrastructure has, over the years, turned out to be another major dampener for the retail businesses in Kerala.
‘UNSUCCESSFUL’ GST COLLECTION IN STATE
A white paper brought out by Dr. T M Thomas Isaac, State Finance Minister, in 2016 had warned of an impending financial crisis in the State, which he attributed to an increase in public debt which nearly doubled from Rs. 78,673.24 crore to Rs. 1,50,000 crore in the five years from 2011 to 2016. The increasing revenue and fiscal deficit along with the huge arrears in tax collection – to the tune of Rs. 10,000 crore – are the causes of financial instability, which according to Dr. Isaac, has been aggravated by two natural calamities.
Meanwhile, GST collection from Kerala has also proved to be less than what was expected. The State was hoping to register at least a 20-25 per cent increase in taxes under the GST regime. However, in reality, the tax revenue collection by the State has not risen above 10 per cent, dealing yet another blow to the State’s economy.