Hit by weak Rupee, IT products' price to increase in July

The weakening of Indian rupee against other foreign currencies,especially dollar, is not a good news for Indian government and importers. Impact of rupee depreciation is huge on the present slow market which has made life difficult for the IT industry, which has also been hit badly.

PC makers are calling it a 'challenging time'. Lenovo and HP, are set to hike prices of their products by up to 10% in coming weeks, owing to increasing input costs due to rupee southward journey.

In this scenario, most of the IT companies have decided to increase the prices of computing range of products including tablets, consumer laptops and desktops, commercial desktops, servers, storage, networking and office automation products and consumables by 8 to 10 % effective from July 1, 2013. Due to the steep decline of the rupee exchange value against the dollar the input costs for computing products are also going up, he added.

As the Indian IT industry is largely import driven, therefore, India import industry will also have to pay more in rupee terms for procuring their raw materials. With the rupee depreciating against the dollar, these companies will need more rupees to repay their loans in dollar. This will increase their debt burden and lower their profits.

Commenting on the current situation, S. Rajendran, chief marketing officer, Acer India, said, "The depreciating rupee has been a bad hit, nobody had predicted it will dip so fast. The rupee has depreciated sharply by about 10 per cent since May and today touched an all-time low level at nearly 60 against dollar. We are seeing a challenging time ahead. The weakening of the Rupee against the US dollar will pinch our margins as most of them import devices or their parts and this could lead to a rise in their input costs."

Depreciation of INR has resulted in drastic increase in cost of IT products which has hit the purchase cycle of the end users as well as corporate. All these factors have contributed to slowdown in economy as well as business. There has been a hike of 5-7% on notebooks, processors and flash memory, which is considered as the fastest selling product of present market, which has resulted in complete slowdown of business. There has been an overall increase in costs of all components by more than 10%.

Speaking on the high inflation ad forex disturbance, Alok Bharadwaj, executive VP, Canon India added, "If I look at the last 5-7 years, in the worst of the time, we grew at 20% and in best of the time we grew at 50%, so for Canon's growth it meant 20-50%. But this is not the year which is not even giving us 20% growth. This year, the first 6 months were flat, so the H1 for Canon is flat over last year. We are hoping the H2 to grow better at least 15% is our expectation in H2. Overall for the year we may grow 8-10%, almost a single digit growth overall with all the difficulties."

To counter the present currency issue, companies have slow down its shipments and going for smaller shipments to counter it, which overall slows down the business cycle.

Nevertheless, the impact of rupee deprecating is also having spiral impact on distribution and IT channel too, According to Swarn Singh, joint secretary, All Delhi Computer Traders Association (ADCTA), "The Nehru place market is all time low. The situation has reached to such a situation,w here many dealers have started exiting from the IT channel business."