The year 2002 was a sluggish year for the Indian plastics industry. 2002 was perhaps the first year in the last decade that plastics consumption in India remained stagnant. It was very surprising that growth of an industry boasting double digit growth every year from 1991, fell severely. In fact, most experts from the local polymer producers believe that the financial year 2001 witnessed a drop of 3-4% in the consumption of commodity polymers.

The consumption of plastics in developed regions during 2001 was lower when compared to 2000. The economies in North America and Europe faltered in 2001. It woud look like India followed the path of North America and Europe, but after a time lag of 1 year. However, despite a poor monsoon, the economic growth in India was about 4.2% in 2002. A weaker rainfall adversely affected the purchasing power of the rural population. Higher polymer prices, particularly towards the close of the financial year (March 2003) and a threat of war in Iraq looming in the immediate future, certainly dampened the industry. While these are very genuine reasons, what is not easily understandable is despite all these factors, the manufacturing industry, showed more than 5.5% growth.

Our investigations led us to believe that imports were higher than what the domestic producers have assumed. We surmise that the accuracy of import data and large fragmentation of the Indian plastics processing industry makes actual data extremely difficult to obtain. This does not permit us to confidentially derive at consumption figures accurately to more than 95-97% of the consumption that is being projected by the local producers. We strongly believe that the overall consumption in 2002 was almost stagnant or just about 50KT higher over the consumption in 2001.

All the negative economic indicators of 2002 have now ceased. Agriculture is expected to show good growth because of good monsoon this year. It is therefore expected that the rural economy will improve. The growth of cement and steel industries make it apparent that infrastructure is performing quite well. The packaging industry, consuming a large proportion of plastic products, also seems to show positive growth. The prices of polymers seem to be now stabilized albeit at higher level, but the fear of increased cost of oil and the other feedstocks due to the war in Iraq is now receding.

Our estimates suggest that the plastics demand will be definitely higher in 2003 compared to 2002. We estimate that Polyolefins will definitely show more than 10% growth and PVC would achieve 6% growth. The star of the 90s, PP, would have somewhat lower growth due to higher price compared to HDPE. Both HDPE and LLDPE are expected to grow quite well.

>We strongly believe that if there are no major negative global factors that affect the industry in the remaining half-year, India could achieve the overall growth of 10%. In fact, we believe that the consumption could show even 12% growth over 2002 consumption.

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