MAIT concerned over market slowdown

There seems to be a lot of confusion between Manufacturers' Association for Information Technology (MAIT) and International Data Corporation (IDC) on the findings of Mid-year Industry Performance Review for the year 2000-01, which has been compiled by MAIT.

MAIT has shown its concern over the slowdown of the PC sales. "With less than expected sales of PCs, especially in the second quarter, the projection for the fiscal 2000-01 has been revised from 1.9 million to 1.75 million units."

On the contrary, IDC has stuck to its previous prediction of 1.75 million units of PC sales for the entire year. It says that despite an economic slowdown, the domestic IT industry is witnessing an exhilarating growth. According to IDC, there is tremendous buoyancy in the Indian IT industry and it will not be impacted by the minor slowdown that the economy is currently facing.

Vinnie Mehta, Director, MAIT, conceded that in the first half of 1999-2000, PC consumption per consumer was 3.1 in the first time buyer sector. Later it went up to 3.5 per consumer in H2 and again in H1 of 2000-01, it came down to 3.1 per consumer. "This means that although the proportion of the segment grew, consumption per person remained at 3.1 only. That means people bought relatively lesser because the segment size grew."

Apart from doing the survey on who bought what, Mehta said that MAIT also tries to figure out the intent of buying for the next half by polling the industry. Taking all these into account, it has been found that in terms of prediction, 98 percent has been achieved in the first half. Within business segment, the larger businesses grew at 39 percent, however, the small and the medium segment registered a growth rate of only 10 and one percent respectively--reflecting the significant change in the buying pattern which is a matter of concern.

As per MAIT, although sales in the business segment remained as per the prediction but in terms of split of the market in the large, medium and SME segments, they bought lesser. Secondly, as compared to the previous year, the growth was far lesser. Medium sector grew by only 10 percent. In the case of notebooks in the first half of this year, 66 percent of the sales were to the larger business segment. Compared to the previous first half of the last year, 66 percent of the sales were to the small and medium segment. The trend just reversed this time.

On the other hand, IDC maintains that in the first half of 2000-01 as compared to the same period of last year, sales of notebook computers, which move primarily into the commercial segment, grew by 68 percent in unit terms. Although component shortage and currency devaluation kept the average sales value of PCs on the higher side, it could not arrest the tremendous momentum that existed in the market. IDC estimates that in the first half of 2000-01, more than 0.85 million PCs were shipped.

The other factor, according to MAIT, which led to the slowdown of the industry was the recent order by the Directorate General of Foreign Trade (DGFT)--issued on November 24, 2000--which makes it mandatory for imported pre-packaged commodities to carry a label specifying, among other things, their maximum retail price. Because of this, several MNCs have containers stuck in various ports. "This is a matter of concern since there is a fear of slowdown with the supplies running dry," said Mehta.

IDC believes that such a small issue will not have a definite impact on the growth rate of the industry as a whole. It confirms that even if there were an economic slowdown, it would at best have a marginal impact on the industry. Aditya Pant, Head (Research Operations), IDC India, said, "Marginal slowdown is expected but there is nothing to be concerned about. Corporates allocate their budget well in advance and the impact shows only two-three quarters down the line."

Mehta argued that budgetary allocation go hand in hand of how much one can buy. "Corporates may plan the budget but what do they do if they don't have money?" he questioned.