Economic Factors And Consumer Durable Goods Economics Essay


In economic sciences, a lasting good or a difficult good is a good that does non rapidly have on out, or more specifically, one that yields public-service corporation over clip instead than being wholly consumed in one usage. Items like bricks could be considered absolutely lasting goods, because they should theoretically ne’er wear out. Highly lasting goods such as iceboxs, autos, or nomadic phones normally continue to be utile for three or more old ages of usage, [ 1 ] so lasting goods are typically characterized by long periods between consecutive purchases. This industry includes all those goods which are lasting i.e. merchandises whose life anticipation is at least 3 old ages

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The consumer durable goodss industry can be loosely classified into two sections: Consumer Electronicss and Consumer Appliances. Consumer Appliances can be farther categorized into Brown Goods and White Goods. The cardinal merchandise lines under each section are as follows.

White Goods

Kitchen Appliances


Washing Machines


Speakers and Audio Equipme

Sewing Machine

Watchs And Redstem storksbills

Kitchen Appliances / Brown Goods Consumer Electronics



Microwave Ovens


Electric Fans

Cooking Scope


Electronic Fans

Consumer Electronicss

Mobile Telephones


MP3 Players

DVD Players


Personal computing machines

Audio and picture system


Common illustration of client durable goodss in the ownership of most families is contraptions. These points may include ovens, iceboxs, wassailers, and gas or electric H2O warmers. Consumer durable goodss of this type are intended for usage on a go oning footing, and frequently are sold with some type of guarantee or service contract that helps to guarantee the contraption will go on working for an appreciable period of clip. The household auto is besides understood to be among the assorted consumer durable goodss owned by many families. Considered a major investing by many consumers, the outlook is that the vehicle will stay operational for at least the sum of clip it takes for the consumer to pay off any loans associated with the acquisition. Further, consumers anticipate that the vehicle can be utilized on a regular footing without fright of being destroyed by the frequent use.


Economic analysis trades with the analysis of forces runing in the overall economic system. In the security analysis, the expected class of the economic system must be enquired into because overall economic conditions and economic activities affect corporate net incomes and investors ‘ outlooks and thereby impact the security monetary values in the capital market. Economic analysis has an of import function in the investing determinations. If the economic analysis shows strong and vivacious economic conditions, investors will purchase the portions in outlook of gaining capital net incomes at a ulterior phase. An outlook of drooping economic conditions can take to take down corporate net incomes and the security monetary value will fall ensuing from the merchandising force per unit area.

The economic analysis helps to place whether the economic clime is contributing or non for the growing of the concern in general. It is imperative to observe that when economic system grows, all industries are expected to profit. In instance of weak economic systems, industries struggle to last.

Porters FIVE FORCE Model

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Economic Prediction:

An investor is interested in calculating the expected public presentation of the economic system in general and its consequence on the public presentation of a peculiar industry or on a peculiar company. Therefore, economic prediction additions a topographic point of premier relevancy in the economic system analysis.

The mentality for the industries and companies depends on the mentality for the economic system. A security analyst may get down with the prognosis of Gross Domestic Product ( GDP ) which is a step of national income and is defined as the value of entire goods and services produced in the economic system in one twelvemonth. An analysis of the constituents of GDP and how these constituents are related to the public presentation of industries and companies is besides required.

Economic Factors to be Considered before Investing in Consumer Durable Goods


Gross domestic merchandise ( GDP ) is the market value of all officially recognized concluding goods and services produced within a state in a given period. GDP per capita is frequently considered an index of a country’s criterion of life

The Gross Domestic Product ( GDP ) in India was deserving 1847.98 billion US dollars in 2011, harmonizing to a study published by the World Bank. The GDP value of India is approximately tantamount to 2.98 per centum of the universe economic system. Historically, from 1960 until 2011, India GDP averaged 368.84 billion USD making an all clip high of 1847.98 billion USD in December of 2011 and a record depression of 36.61 billion USD in December of 1960. The gross domestic merchandise ( GDP ) steps of national income and end product for a given state ‘s economic system. The gross domestic merchandise ( GDP ) is equal to the entire outgos for all concluding goods and services produced within the state in a stipulated period of clip.

Change in GDP consequences on history of:

Change in handiness of resources.

Change in use of these resources, and

Change in efficiency with which factors of production are used.

GDP indicates the public presentation of the economic system during the period. An increasing tendency in GDP Tells about an spread outing economic system which provides a batch of chances to the houses to increase the degree of activities and to increase the net incomes. There are two other steps, Gross National Product and Net National Product which are besides indexs of economic activity.


Employment is a contract between two parties, one being the employer and the other being the employee. The demand for consumer durable goodss has been lifting with the addition in disposable income coupled with more and more consumers falling under the dual income households. Besides, the turning Indian middle-class plays a major function in increasing the demand. This, along with a autumn in the monetary values of lasting goods chiefly due to the promotion of

engineering, easy import of constituents has led to an addition in the ingestion outgo on lasting goods

Interest Ratess

Interest rates straight affect the cost of financess to the industry. Higher inters rates increase the cost of financess and therefore squeezes the income of companies. On the other manus, a lower involvement rate reduces the cost of financess ensuing in higher net income. There are several grounds for alteration in involvement rates such as pecuniary policy, financial policy, rising prices rate, etc. Irrespective of the grounds for alteration in involvement rates, the investing form in the economic system is affected by the alteration in interestrates ; the involvement rates affect the chance cost of the investors besides, therefore impacting the bond and equity monetary values. So, the alterations in involvement rates have reverberation on the net income of the companies every bit good as on the market monetary values of securities. There are several indexs of involvement rates. These are involvement rates in the call money market or the bank rate or the premier loaning rate of the loaning establishments. Consumer funding has become a major driver in the consumer durable goodss industry. In the instance of more expensive consumer goods, such as iceboxs, rinsing machines, colour telecastings retail merchants are marketing their goods more sharply by supplying easy funding options to the consumers by partnering with Bankss.


Inflation refers to a general rise in monetary values measured against a standard degree of buying power. Inflationary force per unit area in the economic system affects ( lessenings ) the buying power of the consumers and therefore has a considerable impact on the public presentation and profitableness of companies. High rising prices rate can be considered as an indicant for slower growing rate and low rising prices rate can be taken as a positive mark for an expansionary stage. Inflation has a relationship with capital market every bit good. During rising prices, the nominal needed rate of return of investors goes up ensuing in the lessening in bond and equity monetary values. Inflation can be measured in footings of sweeping index or consumer monetary value index. An analysis of these indices will bespeak the economic conditions expected to predominate.

The most good known steps of Inflation are the CPI which measures consumer monetary values, and the GDP deflator, which measures rising prices in the whole of the domestic economic system.

Business Cycles

Business rhythms refer to cyclical motion in the economic activity in a state as a whole. An economic system marching towards prosperity passes through different stages, each known as a constituent of a concern rhythm. These stages are by and large designated as depression, recovery, roar and recession. Interest rates and rising prices rates are high. Individual companies face different grades of economic crises. There is a heavy force per unit area on their profitableness ensuing in lesser and lesser dividend payout and reinvestment activities. Companies even forced to close down some of the workss. Some industries Show above-average response and tend to surpass the economic system. These include capital goods industries such as consumer durable goodss. The demand for these goods is by and large deferred during recession period. But during the recovery, the demand form outperforms the general demand degree. However, during the same period, industries covering with indispensable trade goods such as nutrient, are less antiphonal. On the other manus, these industries would be given to surpass the general degree during the recession period


The liquidness in the economic system depends upon the money supply which is regulated by pecuniary policy of the authorities. Reserve Bank of India has been following several steps to modulate the money supply and liquidness in the economic system. Business houses require financess for enlargement undertakings. The capacity to raise financess from the market is affected by the liquidness place in the economic system. The pecuniary policy is designed with an nonsubjective to keep a balance in liquidness place. Neither the extra liquidness nor the deficit is desirable. The deficit of liquidness will be given to increase the involvement rates while the surplus will ensue in rising prices.

Monetary supply and pecuniary environment affect portion monetary values through impacting the discounting rate. An easy pecuniary policy is expected to ensue in diminishing price reduction rate. Money supply besides affects the existent economic system through

Change in growing in demand degree,

Change in growing of supply place


Besides the factors mentioned, there are cartain other factors which should besides maintain in head while economic analysis. Some of these factors are: –

Cheap imports from Asiatic States: The inexpensive imports of consumer lasting merchandises from states like China, Singapore etc is a major concern.

Increasing competition: Presence of a big figure of participants in each section leads to high competition. Besides, the unorganised market is yet really strong in the instance of many consumer lasting goods. The pie of the unorganised sector is comparatively big in most of the sections, therefore increasing the competition.

Fluctuating natural stuff monetary values: Rising input costs of natural stuffs viz. Cu, steel, aluminium and plastic – the major natural stuffs required for this industry will badly set force per unit areas on borders.

Unfavorable Duty Structure: Top participants in the consumer durable goodss industry have been demanding a more favourable import responsibility on lasting constituents imported by them. Take the instance of LCD ‘s which is the fastest turning section right now – the industry has beendemanding a decrease in the import responsibility. Contrary to this is the instance of set top boxes, where 80 % of the set top boxes are imported. The industry has been urging that the usage responsibility on STB should be increased by 5 % to 10 % in order to hike domestic fabrication.

Continuously altering engineering ; a challenge: The consumer durable goodss sector faces the challenge of a uninterrupted alteration in engineering and the inability to get by with it. High-end consumers prefer altering their goods along with the up-gradation of engineering and makers have to do certain they cater to this demand.

Agricultural end product and rainfall form.

Fiscal policy of the authorities.

Global Industrial Linkages

Global Economic scenario and assurance

General Economic Sentiments and assurance in the Economy.

Economic and Political Stability


The mentality for the industries and companies depends on the mentality for the economic system. If the mentality in the economic system is bright and wellbeing, this may be considered as good index of turning net income of the house. The general optimism is reflected in the security monetary values. The linkage in economic environment and the security monetary values is obvious and critical. This analysis helps to make up one’s mind when to put and where to put. The Indian market is fast moving towards high-end merchandises and the importance of media and amusement is turning among the immature market. The consumer durable goodss industry needs to invariably concentrate on invention and needs to come out with merchandise fluctuations across classs to run into the different outlooks of a varied category of clients. With easy handiness of finance, autumn in monetary values due to increased competition, growing of media, growing in consumer base of rural sector, the consumer durable goodss industry is turning at a fast gait. Given these factors, a good growing is projected in the hereafter, excessively.


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