Pooja Sharma & NR Sethuraman

New Delhi/Chennai
June 2, 2008

With the rupee becoming weaker against the US dollar, the IT sector worldwide is witnessing a major slowdown. The dollar, which was trading at Rs 39.90 on March 31, had risen to Rs 42.80 per dollar last week. Following such hike in dollar rates almost all the major PC and laptop vendors have hiked their prices by anything between seven to 13 percent. While HP has hiked its prices by 13 percent on a range of products, HCL has hiked the prices between five to seven percent.

The price rise is not only reserved for PC but also holds true for components as well. Global giants like HP, LG, Lenovo and Compaq have taken the lead in the price hike, and though marginally, all IT hardware prices have increased by four percent.

“This pattern has set in because of the result of the stagnation of production capacity and higher input requirement in China. With the dollar losing hold on the global economy, exchange rates are now in an unstable equilibrium. This has resulted in the commodities imported from South-East Asia to become more expensive,” reasoned Vinay Dugar, Director of Kolkata-based Supreme Technologies.

“The IT hardware price index was stable and marginally low in January-February as stockpiling was in effect and the stagnation trend had already set in China. It was thus expected that after the fiscal year 2007, there is going to be a hike in mid April,” he further added.

“Mostly, hard disks, CPUs and RAMs have been affected the most. However, the incidence of the rise is felt on all imported products as all computer peripherals including motherboards have become costlier,” commented Gaurav Goel, MD, Eastern Logica of Kolkata.

As a result of this trend, IT sales in the East have gone down by nearly 20 percent and are expected to go down further if the price rise persists. In this situation, it is ultimately the consumers who are the hardest hit as they are now liable to pay the extra price as an effect of the appreciation in China.

The price rise has also been felt in South India and the dealers are unanimously attributing this to the appreciating dollar. “Since 100 percent of the products are exported, the rise in dollar rate has naturally increased the prices of all hardware products,” informed R Mahesh, CEO, Ozone Computers, Coimbatore.

Rakesh Jain, CEO, Chennai-based Supreme Computers too felt that the dollar appreciation has played spoilsport in the market. “This sudden price hike in hardware products due to increasing dollar rate has worsened the market scenario, which has been in slump for a while. The price of all the products has seen a huge rise and the rise percentage is yet to be estimated,” he averred.

According to major sub-distributors in Tamil Nadu there has been an average five percent price hike across all the products including laptops, monitors, hard disk's, processors to name a few and almost all the vendors irrespective of size and standard have hiked the prices. Due to the impact of this chain reaction the sales in the market has obviously come down.

According Nitesh Bhandari, CEO, Texonic Instruments, Chennai the 12 to 15 percent hike in the price of products will definitely see a dip of 16 to 17 percent of sales in the market. “Apart from the rise in the dollar rate, price rise in essential commodities like copper and lead has increased UPS prices to a great extent. Increasing oil prices has made the IT products about 15 percent costlier. Due to which, the dealers may loose around 16 to 17 percent of their business,” Bhandari informed. However Yaspal Jain, CEO, Devraj Computers, Chennai fears a 100 percent loss in the business due to this price hike. “No customer would like to buy products unless it is essential. During this time, when the prices are so high, naturally the dealers can't even do one percent of business,” Jain claimed. According to Mahesh, “With the new session starting this was the season when all educational institutions spend enormous money on IT. Those dealers who would have given quotations earlier would now suffer a major set back in their margins,” he claimed. Being the IT hub, the status of Karnataka market seems to be worst hit. “Our dealers are approximately loosing around 40 percentage of business due to this price hike. Being almost 80 percent dependent on the IT industry, no other market in India would have witnessed a setback that Bangalore has witnessed,” informed Sanath Babu, CEO, Sri Durga Computech.

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