News .Food & Beverage
India’s flexible packaging demand to grow substantially to 2022
19 Jul, 2018
19 Jul, 2018
Demand for flexible packaging in the Indian market is estimated to be nearly 5.6 billion USD in 2017, and is expected to grow at nearly 10 percent a year over the next five years according to analysis from PCI Wood Mackenzie.
The market intelligence specialist’s Flexible Packaging Supply Demand Study – India report has identified India’s economy as having slowed in 2017, posting the lowest quarterly GDP growth rate of Prime Minister Modi’s tenure in the first quarter of the fiscal year 2017-18. This is in reaction to the announcement of demonetization in November 2016 and the uncertainty surrounding implementation of the Goods and Services Tax (GST) rolled out on July 1 this year. India’s unorganized sector, which deals primarily in cash, has borne the brunt of demonetization with manufacturing suffering in the first half of 2017. PCI Wood Mackenzie added that uncertainty surrounding the implementation of GST so soon after a major financial event has compounded the impact and weighed on India’s growth in the first quarter of the fiscal year 2017-18. In light of demonetization and the introduction of GST, the unorganized sector of the Indian economy will struggle to function in its current form and with far lower growth in this sector expected going forward to 2022 when compared to historical growth rates. Conversely, the formal organized sector will benefit directly from this and deliver strong growth over the next five years.
PCI Wood Mackenzie noted that despite the current uncertainty, the government in India is looking longer term at options to boost the economy. Together with the introduction of GST, which is designed to simplify India’s complex and localized tax system, regulations around Foreign Direct Investment (FDI) have been relaxed, which will help drive demand for flexible packaging in the Indian market.
India’s complex relationship between each individual end-use sector and the wider economy will see double-digit growth in certain sectors, such as meat, poultry, fish, medical and pharmaceuticals – sectors that operate almost predominantly in the organized market. A major market in India is tobacco, and in particular ethnic chewing tobacco, which is expected to see a major decline over the next five years with government initiatives to clamp down on the unorganized sector and public perception on the health risks of chewing tobacco. The tobacco sector plays a major part in influencing the overall trends seen in flexible packaging and excluding this sector sees overall demand increase to over 11 percent a year for the next five years.
PCI Wood Mackenzie stated that recent government initiatives have had a significant impact on the flexible packaging market, along with the Indian economy as a whole, and it expects to see the volume of business conducted through the unorganized sector to diminish at a fairly rapid rate as the country pushes for a more structured and formal process for industry to operate in.
It added that the flexible packaging supply chain is benefitting from the concerted efforts of the Ministry of Food Processing Industries (MoFPI) in providing financial support for the construction of Food Mega Parks, improved cold store facilities as well as wider government initiatives, such as major improvements to transport links to the more remote regions.
However, there has been significant change in the market as businesses come to terms with the introduction of GST and the financial implications of not complying, concluded PCI Wood Mackenzie.
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