Experts hope that the economy will bounce back sooner than later and in turn will bring the shine back to the country’s lighting industry, which is a bit gloomy under the impact of the slowdown.
India represents one of the world’s biggest lighting markets, and hence, offers lucrative option for global LED manufacturers to set up their facilities in this region. Skilled labour, ease of doing business and demographic advantages provide a sustainable environment for the LED industry. Moreover, government’s support through various favourable policies promoting the investments in energy efficient lighting technologies has expanded the application of LED lights across all sectors – be it residential, commercial or industrial.
Despite all these factors, no industry could continue its growth momentum in an economy which is under the impact of slowdown owing to the economic turmoil across the globe. Adding fuel to the fire is the on-going trade war between US and China as well as US and India. No wonder Indian economy has fallen prey to this and is trying hard to swim over the surface where expenditure – be it public or private – has seemingly been put on a halt. Even the festive season, when consumption reaches its peak, has failed to rejuvenate the country’s economic state.
In order to explore how the country’s lighting industry is fairing in this gloomy environment, we at LED World decided to take an all round feedback. We contacted various stakeholders of the industry including retailers, leading lighting manufacturers, and last but not the least, lighting designers. With the responses we received, we have tried our best to present a clear picture of the overall situation.
State of Real Estate & Auto
The health of real estate is a massive indicator of the state of Indian economy. It has links with about 250 ancillary industries including bricks, cement, steel, lighting & electrical, paints, furniture, etc., and hence, affects them all equally if there is a boom or gloom in the sector. Reports suggest that during last fiscal, the volume of unsold houses has touched a new high especially in tire-I cities. According to real estate research company Liases Foras, the unsold inventory currently stands at 42 months, while an efficient market maintains only 8-12 months of inventory.
Similarly, if we go by the recent joint report by Knight Frank-FICCI-NAREDCO, the real estate stakeholders have downgraded the current period outlook for the ongoing six months to ‘Pessimistic’, indicating no improvement in the level of on-ground activities for the sector. The report also highlights that while the economic slowdown is one reason affecting consumption across industries, the same in the real estate sector is worsened by factors like the NBFC crisis, developer defaults and bankruptcies.
The country’s lighting industry has also faced a setback due to the automobile sector, which is facing its worst crisis in 20 years. This is because the automotive industry also provides productive opportunities for the use of LEDs in head lamps, rear lamps, turn signal and brake lights. But what signals a deeper problem is the Society of Indian Automobile Manufacturers (SIAM) report that 300 dealerships have shut down in recent times. Sales of cars, tractors, two-wheelers have declined considerably. SIAM said about 10 lakh jobs have been hit in the auto component manufacturing industry.
In addition to these factors, the slump in the economy is also affected by various exogenous factors. A leading dampener is the US-China trade war, which has intensified over time and has contracted world trade and, in turn, Indian exports. Also, high rates of GST, liquidity crisis in NBFCs, and shift in the behavioural pattern of the workforce due to the entry of young people has discouraged savings. When people save less in the economy, it leaves less money for investments.
With India’s GDP growth rate slipping to 5% in the first quarter of FY20, the lowest in over six years, the crisis brewing within the Indian economy has gained unanimous acceptance by now, indicating tough times ahead. Be it downtrodden real estate, negative manufacturing growth, recent collapse of the automobile sector, rising number of non-performing assets (NPAs), or the sluggish consumer demand – all these factors are responsible in this deceleration of growth rate.
This is well-observed by Havells India Ltd., one of the leading manufacturers in the Indian lighting industry. “The current economic turmoil is majorly impacted by the GDP growth rate dropping to 5% and this shows that the nation has not yet taken a path of recovery. The imperative slowdown has badly impacted all the sectors irrespective of categories. Especially the medium and small-scale enterprises (MSMEs), which are considered as the spine of quite a few Indian sectors, have been impacted the most,” points out Devashish Ganguli, the company’s Deputy GM.
Ray of Hope
A good thing to note is that the this slump in the LED industry is not as bad as was anticipated. While designers feel that it’s time to introspect and cover up the flaws, manufacturers consider it as a halt before switching over to a more advanced lighting system. Retailers are of the view that the gloomy phase will not stay longer and in a short span of just six months or so, the market will start bouncing back. Most of them believe that ups and downs are a permanent feature of any economy and hence are inevitable. But, we should maintain the calm and remain ready to face it.
This was rightly noted by Ganguli, who is of the firm view that the lighting industry has always shown a positive growth and people have been open to the idea of innovative technology with cutting-edge premium designs when it comes to illuminating spaces. To support his opinion, he also cited a report by Markets & Research, which states that the global LED lighting market size was valued at USD 45.57 billion in 2018 and is projected to expand at a CAGR of 11.8% over the forecast period.
“It is true that the Government of India introduced two disruptive measures in the form of demonetisation and the implementation of GST in the past few years. Like any new initiative, it was initially difficult to cope up with the change but over time, the LED lighting market has shown growth as consumer demands have grown manifold towards energy-efficient lighting systems such as connected lighting,” says Ganguli adding that with the increasing demand for power-efficient lighting systems across residential, commercial, and industrial sectors, factors such as decreasing price of LED lights are a key.
Fighting the Slowdown
As per latest annual reports of the RBI for the fiscal year 2018-19 (or FY19), it is pretty visible that the Indian economy is currently facing turbulent times. At 5% GDP growth rate, the economic slowdown is not very surprising, but its magnitude and impact has been far greater than what was originally anticipated. This is because, the current economic slowdown in the country has seen a drastic fall in consumer demands, which has actually broken the backbone of a developing economy like ours. This has sealed the movement of money as people either do not have it to spend or don’t really want to spend following the uncertainty.
In spite of this challenge, Ganguli said that Havells as an organisation has shown signs of improvement in the ongoing financial year FY19 – FY20. “As a brand, we have been continuously paving the way for innovations through our products in order to meet the consumer needs which have been significantly influenced by technological advancements. We have explored avenues earlier in the form of bringing solutions for smart cities & smart offices, and worked diligently on the same with dedicated team preciously so the slowdown has exactly not affected. This shows the industry gradually changing and our commitment towards innovation driven products and energy efficient solutions with robust distribution strength.”
Time to Introspect
There is nothing to worry about as it is time to reassess the infrastructure that hasn’t been there for years and one hardly gets time to take care of these backend liabilities. “We should use this economic slowdown to improve our infrastructure and solve our backend problems to which we hardly give enough time. So, it is time to make the company internally solid. Also, we should look at reducing prices so that the offerings are more reasonable and people can use them,” opine Gautam Seth and Prateek Jain, the founder duo of Klove Studio.
Founded in September 2005 by Gautam Seth and Prateek Jain, Klove Studio is a sanctuary for instinctive forces in motion. For the founder duo, Klove is a luxury lifestyle choice because it renews confidence in distinctiveness. By combining flawless, yet delicate handblown glass with the sturdiness of primal metals, Klove brings to light the luxury of harmony in a world saturated and fatigued by constant contradiction.
According to the designer duo, the need of the moment is to make luxury affordable considering which Klove Studio is soon going to launch its new collection targeting mid income group. “This season, we are launching a new collection which is far more economically priced in comparison to our previous collections, keeping in mind that today luxury also needs to be affordable and sustainable,” they suggest, cautiously advising that spend on marketing and branding exercises should be curtailed for now, and if necessary, should be done in a very conservative manner.
Putting more thrust to this version, Dr. Amardeep M. Dugar, Founder & Principal, Lighting Research & Design, goes on adding to this advisory. “Clients, especially real estate companies, should not undertake any new projects if they are not in a position to pay their dues to the stakeholders such as suppliers and specifiers like lighting designers. It is better for all new projects to be put on hold until they have a stabilised means of cash flow. The economic slowdown in the real estate has majorly affected the lighting industry. The stakeholders need to be cautious while starting any new project,” he says.
Lighting Research & Design (LR&D) provides research and design consultancy in architectural lighting. It strives to build an international reputation of being the premier consultancy that critically addresses applied research issues by undertaking real-life projects in architectural lighting. As the name suggest, the firm offers complete research, design and education. Under Research, it helps formulating comprehensive strategies for collecting, documenting and evaluating data on lighting. Under Design, the firm demonstrates the holistic applications of lighting that respects architecture and meets human needs, and when it comes to education, it develops pedagogic models for training programmes in the effective use of light.
Impact on Lighting Industry
“It is no surprise that the current economic slowdown in the real estate has majorly affected the lighting industry. Established real estate companies are not paying lighting designers & suppliers their due for the services & products rendered. This has not only soured some of the relationships with my clients as they refuse to communicate their problems, but also resulted in a lot of layoffs in jobs within the lighting industry,” says Dugar adding that though economic predictions are not his area of expertise, still he hopes good logic will prevail and the situation will improve sooner than later.
Seth & Jain accept that whenever there is a slowdown, the business gets restricted to some extent. Also, some fly by the night operators leave the industry and only the solid ones stick to the ground. “It is a natural process where shakedown happens in every economy once in a while. We don’t think that people should feel demoralised. Instead, they should always make a way forward with solid business plans. It’s not the time to start questioning choices, but hold on to expenses which are not required and make sensible investments in things which solidify the businesses further. This is because once the economy would turn around, the players that have stood there bravely would gain the maximum.”
Matching the tune, Sushant Surve, Principal Designer, Brainwave Design, shares, “The economic slowdown has impacted all the sectors including lighting industry. It’s a global slowdown in the economy, and should take at least couple of years to get things on track. However, looking at the current situation, we have to create a pull in the market where we can convince our clients to go for smart products which give them return on investment.”
Founded in 2013, Brainwave is an independent architectural lighting design practice in Mumbai with a team of architects and interior designers, working towards beautiful lighting environment and ambiences. The team provides complete lighting design consultancy from conceptual stage to the commissioning of the project through continuous process of creativity and ideas in lighting design for our clients. Brainwave strives to put forth creative lighting inputs for our distinctive clients with distinctive need and requirements.
Changing Illumination Pattern
Jain & Seth agree that people nowadays have become more practical and they love experimenting. “The change that we have noticed in the past couple of years in the lighting industry is that now people are more open to experimenting with different materials, the lighting has moved away from typical chandeliers to more sculptural in its designing. They have more artisanal values and people are using them more as art and sculptures rather than just hanging lights. Lighting designers are amalgamating technology and art which is a step forward.”
Dugar highlights the other side of the change. He feels that the last couple of years have seen an exponential growth in multiple technologies including Bluetooth mesh, real-time data, Internet of Things (IoT), LiFi, etc., which are defining the lighting solutions of not only today but also of tomorrow. “Together, these technological advancements are forcing a rapid transformation in the way lighting is being perceived and designed nowadays. Additionally, there is a big drive towards ‘circadian’ lighting.”
Surve finds a fine shining line between these two versions especially when it comes to decorative lighting segment. “After the shift from halogen to LEDs, the decorative lighting market has evolved tremendously in terms of design and aesthetics,” he asserts adding that there is a compromise on the output side of the illumination in some cases, which is happening at the same time.
What Manufacturers Say?
Ganguli strongly believes that connected lighting will be the next disruptor as it is the kind of lighting infrastructure that does more than just illuminating the spaces. “It connects fixtures, controls and sensors to a network and can be operated using a dashboard accessible via computer or mobile device. Technologically advanced LED lighting is rapidly gaining popularity within consumer and industrial markets due to their ability to save energy and can be a foundation platform for smart homes and buildings. We at Havells believe that it is imperative to ensure that cities develop in a sustainable way to ensure a healthy future.”
Amidst this turmoil, the most affected stakeholder is the lighting trader. The fraternity, who was already bearing the brunt of the rapidly rising online platform, has been feeling more heat following the slowdown, which has actually restricted most of the economic activities. Not only new establishments, but the renovation market is also severely facing the crunch. In totality, the retailers are spending their time in waiting mode. However, they have kept their hopes alive.
“Since the whole economy is upset and there is visible cash crunch owing to the government being stricter to defaulters, especially in the banking and investment sectors. These are tough times as people are actually feeling the absence of cash flow in the market, which has led to the accumulation of more than usual inventory with traders like us. It will get cleared only when we would bring something new and add to our existing collections. We offer interior lighting solutions and remain cautious that each single customer, stepping into our premises, should be offered a new collection or something different. For this, we need cash flow to stabilise,” says Budhiraja of Azzaro Illuminati.
He goes on adding that further restrictions are there on the money movement because of the halt in government expenditure with respect to the infrastructure development activities. This is again because of the liquidity crunch. “However, the government is doing its bit and taking all possible initiatives to improve the situation. Steps like RERA and opening up of real estate sector for foreign investors are a couple of such drives which are expected to bring some life back into the real estate sector thereby giving us traders a ray of hope. But these are long term measures and there isn’t any immediate relief,” he avers.
Robin Bhasin of Decolites opines that there are a lot of expectations but the condition for now is not seemingly in favour, and this will continue citing the report of other industry verticals upon which lighting business depends. “Of all these, the most important sector for us is the real estate which is directly related to our business and is in a state of tumble for last couple of years now. Situation is already gloomy for us because of the rapidly increasing online trade, which has sent the offline trade to back seat. This is further aggravated by the on-going slowdown in the economy,” he shares.
He adds that there needs to be a push in the private expenditure which is not likely to happen in near future because of the absence of liquidity. “As far as government is concerned, it is doing whatever possible to drag the economy back on track. For instance, it has opened the gate for foreign investment in the real estate sector. If it starts, the move will certainly bring a some relief for us. But it will take more time to respond as the overall economy is eagerly awaiting a booster so that economic activities start happening.”
Nonetheless, he also shares how the introduction of LEDs has added to the prospects. “Today, with the introduction of LEDs, most of the lighting is getting integrated, and we find it easy to convince specifiers like interior designers or lighting consultants than direct customers. In fact, LEDs have increased the possibilities for us by eliminating the rigidity which was there because of the standard designs/sizes of incandescent or halogen bulbs. Quite a few new designs are possible now, which were restricted in the time of traditional lighting sources. Today, all our fixtures are LED compatible,” asserts Bhasin.
The Way Forward
According to Ganguli, robust investment from key enabling sector for lighting industry vertical is urban infrastructure. “Increased thrust on office, retail and hospitality industry will certainly add to the growth in demand. Other measures such as investing money in the public infrastructure may prove to be the catalyst of growth, where smart city projects should include lighting as key focus area whereas private sector participation in smart city projects is accounted to be less.”
“We at Havells believe that GDP will show signs of growth early next year or in the later half if certain provisions are put in place. Measures such as reduction in the level of taxation by the government must be adopted in order to encourage and support economic growth for the market to bounce back. Anti-dumping laws to be holistically implemented and compliance matrix are being drawn once again to boost demand,” Ganguli suggests.
Overall there are two main reasons behind the slowdown in the Indian economy i.e. ongoing liquidity crisis and diminished demand scenario, which together have done an onslaught on consumer sentiments. It is impacting India’s consumption story which shows no signs of improvement in near future. For immediate relief, the government needs to push its expenditure on infrastructure development, which of course, will be a sigh of relief for many other associated industries. This would certainly create jobs and may help boosting the cash flow in the market by encouraging people to spend from their earnings. It’s a must for enhancing money circulation within a short span of time, which is the need of the hour.