1. Why should the global forest products industry pay attention to India?
India today, like China 30 years ago, is positioned to be an engine of global growth for the foreseeable future:
India is entering a demographic “sweet spot” for economic growth
- Building on an average growth rate of 1.3% in the past five years, the population should hit 1.4b in 2022.
- 46% of the population was under the age of 25 in 2016, which indicates strong growth in incomes and consumption in coming years.
- Even as the elderly population in China and other major economies is rising, only 6% of Indians are over the age of 65.
India’s economy is expected to keep growing much faster than its population
- India’s GDP is expected to grow at about 7.0% per year, and per capita GDP is forecast to rise to US$7,450 per person by the end of 2022.
- Industrial production will grow 6.2% per year over the next five years.
- Along with GDP and production, incomes are expected to grow faster than world averages, and other large economies in Asia and around the world.
Paper and packaging demand should sustain its growth for the next decade and beyond
- Indian paper and packaging demand will grow 3.1% per year to over 16.3 million tonnes by 2022
- This growth rate is significantly faster than the Chinese and global averages.
- India has 18% of the world’s population, but accounts for just 3.3% of the world’s total paper and packaging consumption – so there is room for more.
The full study provides much more detailed growth forecasts for specific grades.
2. An interesting point from the Outlook is that, even as other countries are using less printing and writing paper, India’s consumption of graphic papers is expected to keep growing. What India-specific factors are supporting this trend?
India’s ongoing growth in graphic paper use is supported by three key factors:
Obstacles to e-media usage
- The government is investing in an ambitious goal of providing every Indian with at least eight years of education by 2022. Paper consumption rises with literacy rates.
A growing urban middle class
- Limited infrastructure, including poor access to electricity and the internet, will continue to constrain use of electronic media devices in many parts of India, especially rural areas.
- An upward trend in urban population and incomes will support increased paper consumption, both for graphic paper and packaging grades.
3. The Outlook forecasts that imports will actually increase their market share in India over the next five years. What obstacles are constraining the growth of Indian domestic production?
Net imports in 2012-2016 accounted for about 13-17% of total Indian paper and packaging consumption. Based on the research and analysis in the Outlook, we forecast that the import share of total paper and packaging consumption will average around 20% over the next five years.
India’s domestic paper and packaging output is constrained by:
Global trade conditions
- Over the past two decades, much of the growth in the Indian paper industry has been fueled by an expansion in consumption of recovered paper, at the expense of non-wood pulp.
- The global decline in paper demand means non-Indian producers continue to seek Indian markets for their product. Indian producers have difficulty competing due to high fiber costs.
- India has free trade agreements with ASEAN and South Korea, which will eliminate tariffs on imports from those nations.
- Exchange rates played an important role in influencing import levels. A depreciation in the Canadian dollar and the ruble to the US dollar, in 2014 and 2015, made supplies from these countries relatively more competitive.
4. Which other countries are best positioned to meet India’s growing demand?
Nations and regions that have a strong competitive position include:
- Indonesia for uncoated woodfree, coated mechanical and tissue grades
- China for coated woodfree, coated mechanical and boxboard grades
- South Korea for coated woodfree, newsprint and tissue grades
- Europe for mechanical and boxboard grades
- USA for packaging grades
- Russia and Canada for newsprint
5. What are some other opportunities and challenges RISI clients should be aware of?
To address its relative lack of domestic woodfiber production, India has a “Farm Forestry Program” to encourage landowners to supply the pulp and paper industry. It is uncertain whether this will be successful, thus importing woodchips is a second option. However, India’s existing pulp mills are not located near seaports, which is a disadvantage for woodchip imports.
The full Outlook goes into more detail about these and other factors that will affect India’s markets – both in terms of production and consumption.
About Li Meng, RISI Economist and author of the Outlook
Li joined RISI in 2011 as the Asian graphic paper economist, and her responsibilities are focused on collecting Asian graphic paper market information, and analyzing, modeling and forecasting market data with scientific methods such as statistics, macroeconomics, mathematical economics and microeconometrics.
She is the co-author of RISI’s Asian Pulp & Paper Monitor as well as quarterly and long-term forecasts on Asian graphic paper market, and is working with the project team on various multi- and single-client studies on global and Asian graphic paper market. Li holds a Ph.D. of applied economics from Auburn University, USA.