Furniture industry: A sunshine sector for India

• The Indian domestic furniture market is expected to expand at a CAGR of 12.91% during the period of 2020-2024. Global furniture market is estimated at USD 1.1 Trillion out of which Indian market size is less than 5%.
• Currently China is the leading exporter of furniture products with a global share of 37.5% followed by Germany, Poland, Italy and USA. Currently India’s top export destination include US (39.2%), Germany (7.4%), France (6.6%), UK (6.3%), Netherland (6%), and Australia (2.8%).
• Cluster-based development would help to synergize their existing resources and provide opportunity for these players to acquire technology, access capital, upgrade skills, encourage indigenous design and benefit MSMEs units to handle large orders or cater to the need of the international buyers.
• ‘Good Supply Chain Management’ ‘Cost Minimisation’, ‘Brand Management’, ‘Customisation of furniture’ etc. are key factors for the growth of furniture sector in India.

Being an un-organized sector merely focussing on hand-made furniture, Furniture sector in India is grossly under-developed.  The modernisation of this sector with machine & technology will help in the growth of this sector as it has huge export potential. Domestic demand for furniture in India is increasing, which is giving a boost to the organised sector. 

The key factors driving increase in demand for furniture are growth of housing and commercial construction and also increase in income levels that influence customers to adopt global lifestyle options, especially in urban affluent Indians.  It has been observed that for 2018 and from 2014-18, India’s furniture exports surged at CAGRs of 15% & 8.8% respectively, which is way higher than the world average.

Name of the exporting country	Exports in US$ billion in 2018	Share in world exports	CAGR in the last five years
World	256.7	100%	1.1%
China	96.4	37.5%	0.1%
Germany	18.1	7%	1%
Poland	14.8	5.8%	6%
Italy	14.5	5.7%	1%
USA	10.8	4.2%	-1.9%
Mexico	10.6	4.1%	3%
Vietnam	7.4	2.9%	10%
India (ranked 28 in world exports)	1.65	0.6%	8% (also India registered 15% growth in last year)

Source: ITC Trade Map

From the given table it can be cogently observed that the top exporters China and Germany are struggling to bolster their exports. On the other hand, developing economies like Vietnam and India are growing their exports at a brisk pace. Currently, China is the leading exporter of furniture products with a global share of 37.5%, followed by Germany, Poland, Italy and USA.

Source: ITC Trade Map

The Indian furniture market is now more customer-friendly. As per market demand, players are supplying readymade, branded furniture with low maintenance, which is quickly installable with customisation options. The Indian furniture manufacturing sector mainly caters to home, office & hospitality sectors. Though they try to meet domestic demand, India’s imports are growing at a rapid pace. With the fast growing and transforming retail sector, it is expected that large retailers will continue to expand their presence, leading to consolidation in furniture retailing in urban markets.

The Indian domestic furniture market is expected to expand at a CAGR of 12.91% during 2020-24. Various furniture companies such as Pepperfry, Urban ladder and others are creating huge demand from these online channels. Apart from this, the demand for low-cost plastic furniture is also increasing in commercial sector. Ease of doing business policies in India are giving rise to new business investments across the country. In addition, increasing numbers of small and medium businesses are further boosting the demand for low cost plastic furniture products. This is believed to bolster the growth of the Indian furniture market over the forecast period.

Global industry outlook

The European furniture industry is currently facing a variety of economic, regulatory and environmental challenges. Increasing global competition with manufacturing growth in emerging markets, improved logistics and lower tariffs on foreign trade put increasing pressure on EU-based companies. In the domestic market, increased demand for low-cost items makes it difficult for companies focusing on long lasting and quality products to compete. Moreover, increased raw material, labour and energy costs within the EU also challenge business-as-usual practices. In order to face these existing threats, new practices and out-of-the-box thinking such as outward investments and joint ventures are surely one of their most preferred options.

China is the market leader, but still falls behind traditionally strong competitors such as Italy and Germany in terms of quality and unit price. It is also experiencing a growing challenge from lower-income countries such as Poland and Vietnam. Moreover, China now faces more unfavourable macroeconomic circumstances such as rising cost, shrinking international demand, technology gap and escalating trade barriers. The current pandemic is further going to enervate their export position as these economies are deeply affected by COVID 19.

Strategies for India

I. Need for integrated and cluster-based infrastructure development for furniture

Source: ITC Trade Map

The global and domestic trade environment, coupled with government intent for the growing indigenous capability in the furniture sector will provide a window of opportunity to exporters in India to harness the latent potential. Exporters have been interested in enhancing their production capabilities by opening up manufacturing bases in identified regions. The furniture industry in India is dominated by micro and small units. Manufacturing units are not well-equipped in terms of technological know-how, access to capital, ability to design and innovate, control quality and market their products in international market. To achieve the production levels, quality and design standards set by the international markets is the key for these micro and small players to maximize their potential and contribute towards the growth of the sector.

Cluster based development would help to synergize their existing resources and provide an opportunity for these players to acquire technology, access capital, upgrade skills, encourage indigenous design and help MSMEs units handle large orders or cater to the need of the international buyers. Thus, the common facilities proposed would benefit the entire industry, especially the MSME segment.

TOP 10 EXPORTED FURNITURE TARIFF LINES BY INDIA, IN US$ MN (8-DIGIT)

Tariff Lines	Product label	Exported value in 2018	CAGR in past five years, %
94036000	Wooden furniture	515.1	6.5
94049099	Articles of bedding and similar furnishing	391.6	9.7
94032090	Metal furniture	78.7	15.9
94019000	Parts of seats, n.e.s.	63.7	10.6
94049019	Articles of bedding and similar furnishing, fitted with springs or stuffed or internally	49.8	11.2
94016900	Seats, with wooden frames	42.4	-0.8
94038900	Furniture of other materials, including cane, osier or similar materials	41.6	33.0
94012000	Seats for motor vehicles	36.5	35.3
94069090	Prefabricated buildings,	35.8	NA
94039000	Parts of furniture, n.e.s.	34.2	31.8

II. Need to move up the value chain

Emphasis on four factors – lack of indigenous development and acquisition of technology, adoption of acquired technology through research, brand building and inadequate emphasis on human resource development is critical for the furniture sector in India. Exports from the cluster are primarily value-added products, large volume and low volume goods.

III. Mega furniture cluster in India

The idea is to promote and produce competitive products in which the country has a distinctive advantage. India should try and produce what it is good at and at the cheapest price so that people are inclined to buy and the product is competitive globally. Also, the focus should now be on exporting more finished products rather than raw materials, to counter many tariff and non- tariff barriers. 

The other strategy is to identify new sectors that have the potential to sustain in the market for the next 20 years, like furniture. This sunrise sector alone has the potential to push exports of US$ 50 billion-plus. If we take furniture exports, India has abundant raw material, manpower, skills, etc. and the potential to be price competitive on a global scale. The government is subsidizing artificially to support uncompetitive sectors for long, which is proving to be counterproductive. If we take the example of China, the focus on new sectors has yielded them rich returns. China’s export in the furniture alone is US$ 350 billion. India should adopt a similar approach to futuristic sectors, and the furniture sector certainly merits attention in this regard.