VIP Industries Ltd. is one of the companies that stand to gain from a stronger economy and increasing income of the people. Significantly, the luggage industry is estimated to witness an expansion of 15 – 20 percent in India driven by higher incomes. This is interpreted as more funds available at the disposal to plan more travels by Indians. Over the years, India has moved up in the global ranking of the world’s top economy in terms of the American dollar.
VIP Industries chairman, Dilip Piramal, has pointed out that there was a considerable pick-up in some sectors of the industry to drive the growth in the luggage industry. This included aviation, rail and road transport. As a result, demand for travel bags have also increased, BloombergQuint reported. The company is not only the biggest homemade luggage firm but also earned a name for itself over the last few decades.
Significantly, a London-based Centre for Economics and Business Research indicated earlier that India is set to move up its position to the fifth biggest economy in the world in the current year. The country was ranked seventh in the preceding year. That suggested the available growth opportunities for the company to take advantage. The effect of demonetization seems to be disappearing from the economy while businesses and people have moved towards the GST regime.
Aside from the economic conditions of the country, VIP Industries chairman pointed out two big factors that should be borne in mind. The first one among them is that the travel is the main driver for luggage makers to boost its sales in India. When the economy grows faster, disposable income becomes higher to help boost travels. However, increasing oil prices could restrict the growth as the cost of travel could increase.
The second big factor is weddings. This event keeps going throughout the year barring few months. Piramal pointed out that the first quarter, which is April to June, of a financial year has always witnessed strong performance due to increased demand. He cited the peak wedding season as the primary reason behind the strong numbers.
Keeping Costs under Control
VIP Industries is also worried about the increasing costs especially when imported from China since the manufacturing costs have increased. Hence, the company has started sourcing locally. This included Bangladesh as the objective is to ensure that the costs are under its control. This meant that the company would return to be termed as a manufacturing firm. This also fits well with the government’s ‘Make In India’ objective.
Previously, there was a ban on import of consumer goods. However, it was lifted in 2002 while customs duties have started dropping in the following years. Therefore, the company has shifted its manufacturing base to China to cover the Indian market. Now that the wages have increased in the biggest economy of Asia, VIP has resorted to higher production in India itself.