Last week, Sumit Joshi was passing by a TV showroom in Delhi's Lajpat Nagar market when a 21-inch, flat-screen LG TV set caught his eye. An hour later, Joshi walked home with a new TV for only Rs 15,650. Two years ago, the same set would have cost him Rs 24,000. When Suresh Mahadevan, a movie buff, checked out a DVD player at the Heera Panna Shopping Arcade in Mumbai last year, the Rs 20,000 tag proved a deterrent. This year, he purchased a Philips DVD player for Rs 12,500.

Mumbai Raj and Shibani Thakur With four TVs bought in the past five years, there are no battles for the remote at the Thakur home. The pride of place is for the latest buy, the 29-inch Japanese-made TCL, bought last week for Rs 25,000. Raj, 27, who runs cyber cafes, will watch his favourite films, Terminator 2and Jurassic Park, along with wife Shibani.

With the festive season reflecting the sagging economy and devoid of the accompanying buzz, the drastic price slash across the consumer goods spectrum may be the best news yet. It could possibly be the cheapest Diwali in five years. An AC Nielsen ORG-MARG analysis of price trends in four categories for 1999-2002 (see box) conducted exclusively for India Today reveals declining prices across categories "with a pattern of higher price cuts for higher-end segments".

The sharpest cuts have been in CTV prices. Players like Sony and LG, who entered through the high-end gate, have been forced to rethink strategies. In refrigerators, the frost-free segment is leading price cuts of up to Rs 4,000; in washing machines, high-price models have been forced to dip prices; in the audio segment, the price cut has been accompanied by new features.

Mumbai Ajai & Komal Bathija Three years ago, Ajai, a 32-year-old movie buff who heads online and offline sales at the stock trading house Sharekhan, wanted to buy a DVD player. But with even the cheapest, no-frills player coming for Rs 26,000, he wasn't buying. Last week, he along with wife Komal bought a Philips DVD player for Rs 12,000.

The coolest deals, however, are for air conditioners. Says R.S.S.N. Raju, vice-president (operations), Voltas: "A 1.5-tonne ac which cost Rs 31,000 five years ago comes for Rs 20,000 now." To appreciate the improved affordability, factor in the rate of inflation that has averaged 4.5 per cent over the past four years. In essence, the Rs 31,000 ac should have theoretically cost around Rs 37,000. So the real drop in prices is around Rs 17,000.

The dip is the steepest for cellular phones and computers. "In 1995, the cheapest phone cost around Rs 12,000. Today you can buy a better phone for Rs 5,000," says Pankaj Mohindroo, ceo, Agrani Convergence Stores, and president, Indian Cellular Association. Five years ago, a branded pc cost upwards of Rs 50,000. Today, a faster machine costs just Rs 39,000 and comes with goodies like dvd/vcd or cd writers.

CLEAR VISION A 21-inch, flat-screen LG TV launched for Rs 23,000 in 2000 is now available for Rs 17,000. Since 1999, the prices on an average have dropped by Rs 3,000 for a 14-inch CTV, by Rs 3,600 for a 21-inch TV and by Rs 10,000 for a 29-inch TV. Source: ORG-MARG.

CHILL OUT An LG 380-litre frost-free refrigerator priced at Rs 40,000 in 2000 now comes for Rs 33,000, while the price of a similar Godrej fridge has slid from Rs 33,495 to Rs 25,895. Even the directcool segment prices have dipped between Rs 400 and Rs 1,600 depending on the capacity. Source: ORG-MARG.

KEEPING PACE In 1998, a Maruti 800 Standard with an eight-valve engine and leaf springs cost Rs 2.09 lakh. Now, an upgraded Maruti 800 Euro I with coil springs, side impact beams and radial tyres comes for Rs 1.88 lakh. A Euro II model with 16-valve engine is for Rs 2.08 lakh. Source: Maruti Udyog. Ex-showroom prices, Delhi.

WASH OUT A Siemens front-loading washing machine priced at Rs 28,079 in 1999 is now available for Rs 21,343. While prices of other models don't show such a dramatic fall, they have slid between Rs 1,500 and Rs 2,000 Source: ORG-MARG.

COOL DEALS In 2000, an LG 2-tonne split air conditioner cost Rs 63,000. Today the same comes for Rs 40,000 along with gifts. In 1998, a standard 1.5-tonne AC would have cost Rs 26,000 or Rs 31,000 depending on whether it was a Carrier or a Voltas. Today it can be had for Rs 19,500 or Rs 20,000. Source: Trade and Industry.

BIT BY BYTE In 1998, a Compaq computer with a 14-inch monitor, 32 MB RAM with a 4 GB hard disk and CD-ROM drive cost Rs 50,000. Today, at Rs 39,990, one can get a 40 GB hard disk, 128 MB RAM with a printer, webcam and a one-year onsite warranty. Source: Compaq

SPEAK EASY When mobile phone services were launched in 1995, the cheapest phone cost Rs 12,000 and the high-end ones, over Rs 35,000. Today a far superior entry-level phone comes for Rs 5,000, while a high-end instrument can cost Rs 25,000. Source: Indian Cellular Association

WATTS UP? A Kenwood mini-audio system with VCD which cost Rs 28,036 in 1999 is now available for Rs 15,251. In 1998, a 400-watt PMPO Philips CD system cost Rs 16,503. Today, for Rs 17,527, one can get a 3 CD changer with MP3/VCD blasting 1,500 watts. Source: ORG-MARG/Philips

DIGITALLY YOURS Three years ago, when they came in the market, a low-end DVD player cost over Rs 25,000. With the entry of many more companies, the price has dipped to Rs 14,000. Today, one can easily pick up a DVD player for as little as Rs 9,500. Source: LG/Trade and Industry.

Add a plethora of discounts, freebies and even lottery gifts you can ferry home in cheaper and better cars. "This is undoubtedly the cheapest Diwali in five years," says Jagdish Khattar, chairman and managing director, Maruti Udyog. He should know, having led the price war and brought down the price threshold for cars to below Rs 2 lakh.

So what is driving down the prices? The economic slowdown reflected in the lacklustre shopping malls is a major contributor. Falling tariff-down from 60 per cent to between 16 and 32 per cent-has also played a critical role. "The truth," says Ganesh Mahalingam, gm, marketing, LG Electronics, "is that liberalisation has finally arrived," triggering factors key to dipping prices. As the economy opened, new players came in, triggering competition for market share, and hence, price cuts. More players also translate into higher capacities, which has a dual impact. "Larger capacities deliver economies of scale and lower input costs," says Subir Gokarn, chief economist, CRISIL. Higher capacity also results in supply outstripping demand, leading to a rush for the critical mass. Either way, the consumer gains.

As new entrants bring in technology at a lower price, others are forced to follow. K. Ramachandran, CEO (India), Philips, says, "The firms that cannot keep up the innovation momentum will pay the price as margins crumble." Technology also helps cut costs via better management of sales-inventory ratio. Price is a key denominator, which is why "every link from supplier to producer to retailer is squeezed to deliver what the consumer perceives as value for money", says Mahalingam.

Sujit Das Munshi, vice-president and executive director, AC Nielsen ORG-MARG, says, "The era of being production driven is over." Price is no longer the sum of cost and margin. Producers research what the consumer is willing to pay and work their arithmetic backwards. Helping this new arithmetic are falling interest rates. Car finance rates have dipped from nearly 21 per cent to 11 per cent in five years and the consumer needs to pay just 25 per cent of the money upfront.

Given the paradigm shift in the market, it isn't surprising that lower prices have drawn consumers. Between 1996 and 2001, the sale of ACs rose from Rs 818 crore to Rs 1,825 crore, for TVs from Rs 3,643 crore to Rs 7,500 crore, refrigerators from Rs 1,445 crore to Rs 2,335 crore, computers from Rs 3,149 crore to Rs 8,409 crore and cars from Rs 8,812 crore to Rs 16,800 crore. While competition may have bumped off some players, low prices have helped expand the market.

But will the good times last? Khattar thinks they can't. "Manufacturers can't afford to continue spending money meant for re-investment on discounts." Raju agrees, saying volumes don't justify cuts. However, Bibek Debroy, director, Rajiv Gandhi Institute of Contemporary Studies, says that "as and when it happens, prices should slide further". Mahalingam agrees.

"A billion people buy only two million PCs a year. India boasts nine million cell-phone users as against 190 million in China," says Mohindroo. The reason clearly is price. A decade ago, the price of a 21-inch TV in China was $400 (Rs 19,600). It is $80 (Rs 4,000) now.

Says marketing consultant Rama Bijapurkar: "The demand exists, but manufacturers need to fashion and supply appropriate products with appropriate technology at an appropriate price." India Inc is clearly making a start.

-with Sandeep Unnithan, Stephen David and Shuchi Sinha