Indian plastics manufacturers are cautiously optimistic, with some having escaped the impact of global financial meltdown so far, while others have cut production by about 40-50 percent since October.
The consumer-driven Indian economy, projected to grow just 5-7 percent this year from a recent annual high of 9 percent, has saved many of the local plastics producers. The country's plastics industry sectors posted growth rates ranging anywhere from 6-20 percent in 2008.
But we believe we may get hit by the economic recession in the future, warned Sunil Jain, president of Veraval, India-based Rajoo Engineers Ltd., a maker of blown film lines, extruders and thermoforming machines.
Rajoo's equipment is used largely for manufacturing consumer products, which has been a boon, as Indian consumer spending has maintained momentum in that area.
But Dipty Lal Judge Mal Pvt. Ltd., which makes parts for carmakers and refrigerator manufacturers, for example, is down to 60 percent of its previous output. Managing Director Dev Jain hopes the firm can return to full capacity by March, though its recovery will be painful.
We were hit by the high-cost inventories, the value of which dropped sharply along with the resin prices, in tandem with the huge plunge taken by the international crude oil prices in recent months, he said. In India, buying of cars, motorcycles and fridges are being postponed. Our customers are still holding inventories.
But some firms expect demand to improve in coming months, as India's government has lowered excise duties and taxes by 4-10 percent since December. There also are indications that banks will reduce interest rates, currently hovering at 15 percent.
Though Dipty Lal's inventory cost is high, Jain has worked out a pricing strategy that gives discounts and rebates to customers. This is important time to hold market share and support customers, Jain said.
Now is not the time to invest, said Bal Krishan, director of Jaipur-based Silver Grace Polypacks Ltd., which makes high density polyethylene and polypropylene woven fabric and bags for the cement industry.
The firm has delayed plans to add multilayer packaging since the growth rate for its bags has dropped by half, to 6-7 percent, because of a slowdown in India's construction activity. But Krishan expects government financial relief packages could bring about a recovery for his business within three to six months.
We are in for a long haul as far as the international financial crisis is concerned, said Ashok Goel, vice chairman and managing director of specialty packaging maker Essel Propack Ltd. in Mumbai. It's time to manage business without compromising growth and get the most out of existing capacity, Goel said.
Manoj R. Shah said he expects the financial crisis to last a year. But, it should be used to tap new opportunities, said the head of R.P. Shah & Sons, an importer and distributor of DuPont Co. resins in India.
Rajoo's Jain agreed. Because the U.S., Europe, Japan and South Korea have been hit hard financially, Indian firms should look aggressively at international export markets especially Africa, Latin America and the Middle East where their plastics machinery, tooling and products are competitively priced, Jain said.
The consumer-driven Indian market has been steady, but let's prepare for managing businesses globally, he said.