INDIA – Despite the recent slowdown in economic growth, thermoplastic consumption in the Indian Subcontinent has grown by 10%/year since 2007 and is expected to continue on a similar positive trajectory over the next five years, according to new research.
According to Applied Market Information (AMI)'s 2013 Indian Subcontinent Plastics Industry Report, the total demand for thermoplastic resins in the Indian subcontinent will top 12.5 million tonnes in 2013.
With a population greater than China but polymer demand only one-fifth the size, the subcontinent region's plastics industry has enormous potential for growth, claims AMI.
Historically the region has been fraught with policy restrictions on foreign investment in certain industries, high tariff barriers and protectionist government policies.However, a process of deregulation and the removal of quotas and production licences has facilitated greater investment in both petrochemical and plastics processing activities.
Meanwhile, strong economic growth is raising living standards and increasing consumption of a wide range of consumer goods from packaged foods to automobiles. Investment in infrastructure and agriculture is also important in driving the plastics industry in the region.
Plastics growth potential in the Indian subcontinent
The scale of the potential for the region is illustrated by its per capita demand which for 2013 will still be less than 8kg/head, although this compares to 5kg/head in 2008. By contrast, per-capita consumption of polymer stands at 24kg in China and 75kg in Europe, with the world average 28kg.
India has led the growth as it accounts for 87% of the subcontinent’s consumption of polymer. Growth has been driven through a number of different end use industries such as building and construction, packaging, automotive and agriculture.
Sri Lanka now has the second highest level of per capita demand for thermoplastics, highlighting the recovery in manufacturing following the ending of its long civil war with the Tamil Tigers in 2009.
On the other hand, Pakistan has experienced the slowest growth in the subcontinent over the past five years where the economy was more impacted by the effects of global recession reducing its exports and the on-going security situation.
Bangladesh has a population that is only 15% smaller than Pakistan’s but a polymer consumption which is roughly a quarter of Pakistan’s, due mainly to a lack of infrastructure, the country’s tendency to flood during the monsoon and a lack of local polymer production. However, the availability of cheap labour gives it the potential to develop as a low cost manufacturing base for exported plastic products.
Nepal is the smallest subcontinent consumer of polymer and although demand has been growing ahead of GDP, it is developing from a very small and unsophisticated base. According to the report, the country is unlikely to be able to develop a significant plastics processing industry because of its geography, both in terms of its landlocked mountainous terrain and its proximity to two manufacturing giants in China and India.
Problems still facing the region’s plastic processing industry
Whilst the outlook for plastics processing in the Indian subcontinent is positive, the report notes many challenges still facing the industry in terms of its infrastructure - relating not just to transport links but also issues from energy to the banking system, the limitations of which all serve to hold back business - and the fragmented nature of its plastics processing industry.
Whilst these countries tend to have a strong entrepreneurial ethic this has led to a proliferation of small processing companies, running old and inefficient equipment, which lack the access to capital to invest and really develop an internationally competitive, modern manufacturing industry.
For the Indian subcontinent to reach its full potential, the report recommends that the plastics processing industry rationalise, consolidate and invest in modern equipment to reduce costs and improve performance.