There are two sides to India's plastics industry — a place of huge potential, an untapped market that could be the next China, and a place where manufacturing has underperformed and not lived up to its potential.
By the numbers, plastics has not penetrated India like other countries: the average Indian uses 9.7 kilograms of plastic in what they buy each year. A Chinese person, on the other hand, uses 45 kg. and a Brazilian, 32 kg. The average U.S. resident uses 109 kg.
From 2012 to last year, India's economy experienced some tough times. Its plastics machinery market had yet to recover from the highs it saw in 2011.
But many in the industry see that changing, the difficulties of the last few years ending, and long-term growth ramping up.
Reliance Industries Ltd., India's largest plastics maker, projects that the country's polymer industry will grow 10 percent a year through 2022.
Coming on top of an average annual growth of 7 percent in its plastics machinery market since 2000, some executives see India moving to close that plastics consumption gap with the rest of the world.
“We see that low consumption as an opportunity,” said Ron Krisanda, chief operating officer at U.S.-based Milacron LLC, which last year announced a plan to invest $30 million in its plastic machinery manufacturing operations in India. “We believe the growth is going to be there.”
The election of Prime Minister Narendra Modi in 2014 and assumption of national power by his Bharatiya Janata Party has given hope to businesses that some of the infrastructure and regulatory challenges facing India can now be dealt with.
The election was widely seen by the business community as a call for economic change, and Modi followed up by introducing a “Make in India” campaign of policy reforms to boost manufacturing.
Those changes are being widely watched by global manufacturers, particularly those looking for low-cost manufacturing as China becomes more expensive.
More needs to be done but there's potential for major growth in India's manufacturing sector, according to a November report from the Paris-based Organization for Economic Cooperation and Development.
“Reducing barriers to manufacturing growth, which has contributed relatively little to growth of GDP or exports, will be critical,'' OECD said, adding that India needs ‘'a simpler and more flexible labor law, covering more workers, coupled with better education and training programs.''
Major foreign machinery investment
India is attracting major investments from the machinery sector, and the mood at the Plastindia 2015 show, held in February in Gandhinagar, was more upbeat.
In 2012, Japan's Toshiba Machine Co. Ltd. bought one of India's largest home-grown injection press makers, L&T Plastics Machinery Ltd., and has since invested in upgrading manufacturing, including for exporting Indian-made machines to the United States.
There's also the sizable investment by Milacron, which has the No. 1 market share in India's injection press sector, and a $50 million plan by Japan's Nissei ASB Machine Co. Ltd., revealed at the show, for a new Mumbai factory as a low-cost production base.
It wants to use it as an export factory and meet domestic demand, even though like for other companies, India's been tough the last few years.
“We also had a not very good experience in India the last two years,” said Kota Aoki, president and CEO of the Komoro, Japan-based company. “Now they are saying the next three or four years, the market situation is improving. So that's why we are now investing more.”
The Plastindia Foundation trade group projects the plastics machinery market will grow 11.7 percent a year through 2024, much faster than the rate the sector grew from 2000 to 2013.
Part of what excites executives about India is a PIF projection that the country will double its plastics use per person, to 20 kg, by 2020. Polymer processing capacity grew 11 percent a year the last five years, the trade group said.
Analysts outside plastics note improvements. OECD said that India's industrial production rebounded in 2014, after the manufacturing sector contracted in 2013, in volume terms, for the first time since 1991.
It said in November that “business sentiment has surged, triggered by a decline in political uncertainty.”
But some in industry say structural economic reforms remain crucial to long-term success.
An executive who sits on the boards of four plastics companies in India said the country clearly has the potential to be a major global plastics processing center but said “it could take 25 years.”
“Things can change dramatically if the government makes the land buying laws simple and if government changes the labor laws and if there is some rationalization of taxes,” said Pushp Raj Singh, in an interview at Plastindia.
He sits on the boards of a cross-section of India's plastics industry: Plastiblends India Ltd., Windsor Machines Ltd., Cello Wim Plast Ltd. and Shaily Engineering Plastics Ltd.
The managing director of one of India's largest plastics processors, Cello Group, expects the market to be good for the next five years, provided that the Modi government can move ahead on reforms.
India will not grow at China's pace, the economy is much more guided by domestic consumption than China, but the long-term potential is there for India, said Pankaj Rathod, in an interview in Cello's Mumbai offices.
“I think it will take some time because what China did in terms of industry, it will take a number of years for India to go to that level, a lot of infrastructure and things like that have to be developed,” he said.
But he quickly added that “this government, if they can implement all the things they are saying, I think the next five years will be good years.”
