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Polymer demand outstrips GDP in India as it becomes third largest market globally

Polymer demand outstrips GDP in India as it becomes third largest market globally

31-Jul-12
An insatiable manufacturing industry, a surging economy and supportive government policies have already made India a polymers superpower, but the best is yet to come, states a new report by GlobalData. India is currently the world's third largest consumer of polymers, behind China and the US, with a share of 5.7% of the 2011 global total – an increase from it's 2000 portion size of 3.5%. Growth in the polymers industry kicked off in India after the country's economic liberalisation in 1991. The resulting deregulation and privatization sparked a boom in end-use sectors such as packaging, construction and automotive that has seen per capita consumption increase from 1 kg in 1980 to 7.4 kg in 2010, as per the report. This level, however, is still much lower than the world average and with surging industrialization and an increasingly powerful economy, the subcontinent still has massive as-yet largely untapped potential. Production levels are soaring in order to keep up with India's ravenous demand. In 2011, the manufacture of polymer products was 7.377 mln metric tpa, and this will surge at a CAGR of 9.4% to reach 11.575 mln metric tpa by just 2016. Commodity plastics account for the lion's share of polymer demand on the sub-continent. Consequently, most capacity additions in recent years have focused on PE, PP, PVC, PET and styrene-butadiene rubber (SBR), which together account for more than 90% of output. The research indicates that polymer demand in India is even outstripping the country's strong GDP growth; in the period 2000 to 2011, India's GDP climbed at a Compound Annual Growth Rate (CAGR) of 7.6%, whereas polymer consumption across all areas grew at a CAGR of 9.1%.

India's complex relationship with plastics is becoming ever more important as reliance on plasticulture is set to explode over the next five years. Plasticulture, which involves the use of plastics in agriculture and horticulture, amongst other areas, is growing in popularity across India. In particular, micro-irrigation – the strategic placement of small devices used to deliver water to specific soil locations – is being adopted as it can reduce water requirement by up to 70%. Micro-irrigation is a highly beneficial agricultural technique in countries where water can be sparse. Accordingly, the Indian government launched the Micro-Irrigation Scheme (MIS) in 2005 with the aim of increasing the amount of land under this more efficient method of irrigation and by 2010, the MIS had brought 1.79 mln hectares under micro-irrigation at an approximate cost of US$450 mln. This coverage is expected to sky-rocket over the next five years, with proposals to expand micro-irrigation coverage to over 10 mln hectares by the end of 2017. This huge rise in micro-irrigation deployment will spark demand in polymers that will reach 0.495 mln metric tpa, the highest portion of which will be polyethylene, at 0.373 mln metric tpa. Precision Farming Development Centers (PFDCs) have been instrumental in encouraging the adoption of modern agricultural techniques involving plastics. These institutes promote plasticulture by conducting trials, demonstrations and workshops through training and awareness programs throughout the different climate zones of the country. At present there are 22 PFDCs across India, spreading the use of innovative methods in the field of plasticulture. The packaging and automotive sectors are the growth drivers of India's polymer industry. Packaging currently accounts for more than half of demand, and is showing huge growth potential. The processed food industry alone is thought likely to grow to a value of US$30 bln in 2015. India's automotive industry, another major consumer of polymer, is one of the world's fastest growing. Over the past five years, output of new automobiles doubled from 9.5 mln units in 2006 to 18.2 mln units in 2011. Demand from this industry is boosting consumption of PP and SBR in particular. With increasing investment in the plastics processing sector, exports of plastic products are "growing at a phenomenal rate," the research group says, adding that this has improved efficiency. The export value of processed plastics has doubled over the past five years, rising from US$1.1 bln in 2006 to an estimated US$2.3 bln in 2011. Most of the investment in this sector is seen to be taking place in extrusion moulding, which accounts for about a third of plastics processing capacity in India.
India's government has played a key role in boosting the significance of polymers, in terms of both consumer demand and in the production industry. The government has delineated Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) where production facilities can blossom. Four of these PCPIRs have been approved so far and two more are in the pipeline. The government also approved 100% Foreign Direct Investment (FDI) which allows foreign firms to have 100% ownership of food processing companies, which will in turn create a higher demand for plastic packaging materials.

 
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