By India’s pulp and paper industry is experiencing remarkable growth, positioning itself as one of the fastest-growing paper markets globally. According to recent reports from the Indian Paper Manufacturers Association (IPMA), the domestic consumption of packaging paper and paperboard is projected to rise at an impressive annual rate of 8.2%.
“A million tons in capacity will be added. But it’s not as much about capacity as the focus on modernization, de-bottlenecking and replacing old technology. Around ₹5,000 crore of the investment will be on new technology to help lower carbon footprint,” IPMA president Pawan Agarwal said in a select media interaction on Tuesday.
“There is a lot of expected demand for paper industry and products. E-commerce has driven the demand, and we are expecting 8.2% CAGR for the next five years, which is almost similar to the GDP growth,” he said.
This surge is driven by various factors, including economic growth, changing consumer preferences, and governmental policies aimed at promoting sustainable practices. While there are significant prospects for growth and innovation, stakeholders must also navigate various challenges facing the industry. Let’s take a comprehensive look at the Indian paper industry, examining its current state, growth potential, and the various factors influencing its development.
Current landscape of Indian paper market
The paper industry in India is currently valued at around ₹80,000 cr. and produces over 25 million tonnes of paper annually. It experienced notable growth in the first six months of the current financial year. Looking ahead, estimates suggest that by the 2029-30 fiscal year, the industry’s contribution to the GDP will reach 1.32 lakh crores.
The country’s paper production capacity has experienced consistent and substantial growth in recent years. By the end of 2024, the country is projected to achieve a compound annual growth rate (CAGR) of 6.30% in pulp and paper capacity since 2019.
India’s pulp and paper capacity
The pulp and paper industry plays a vital role in the Indian economy, offering employment opportunities to over 500,000 individuals. Their labor contributes approximately 1.6% to India’s total GDP.
Growth by different grades
The rapid expansion of e-commerce has significantly increased the demand for packaging materials. Writing, printing, and copier grades are witnessing steady demand as well—an unusual phenomenon among major producing countries.
India’s pulp and paper capacity by major grades
Packaging paper, containerboard and cartonboard see the most significant growth, driven by the expanding packaging and e-commerce sectors. Meanwhile, demand for printing and writing paper remains stable, highlighting the evolving needs of the industry. The rise in market pulp also reflects the overall growth in paper production to meet diverse demands.
Packaging leading the way
Demand for better quality packaging of FMCG products, textiles, pharmaceuticals, among others, as well as, booming e-commerce and rising healthcare spends are among the factors that are driving the growth of packaging paper & paperboard market in India, it said.
The domestic packaging paper & paperboard market stands at about 15 million tonnes which is nearly 65 per cent of the total paper, paperboard and newsprint market of 23 million tonnes in the country, the report said.
Paper and paperboard manufacturers in India are implementing capacity expansion, de-bottlenecking as well as technology upgradation projects involving an investment of ₹25,000 crore, a top leader of Indian Paper Manufacturers Association said.
The ban on single-use plastic, with paper offering a sustainable environment-friendly option, has also emerged as a key demand driver for these products , it added.
Opportunities for paper producers
Rising literacy rates, particularly in rural areas, have significantly fueled the demand for writing and printing paper. The emphasis on education will continue to drive consumption in these categories. A key factor influencing this growth is the implementation of India’s New Education Policy (NEP) in the 2023-2024 academic year.
The NEP aims to enhance educational access and quality through various reforms: extended schooling period, higher education reforms, universal access to school education, foundational literacy and numeracy, and more.
The revamped syllabus and restructuring of the grade system under the New Education Policy (NEP) present significant opportunities for paper producers. By aligning their production strategies with the objectives of the NEP, paper manufacturers can effectively cater to the evolving educational landscape.
Demand for tissue paper
The demand for tissue products, whether for household or commercial use, has also seen significant growth. Items such as toilet paper, paper napkins, and kitchen towels are becoming increasingly popular.
While a large portion of the demand for paper napkins currently leans towards MG paper due to its cost-effectiveness, there is a noticeable shift towards soft tissue products. This change is primarily driven by a heightened awareness of hygiene practices and an increase in disposable incomes.
Investments in the tissue sector are on the rise, targeting both local consumption and international markets. Leading companies like GSPBL, APPM, and TNPL are spearheading these efforts with new projects and advancements. These investments showcase the potential for growth in the tissue industry and present opportunities for innovation and expansion.
Challenges
On challenges for the industry, Mr. Agarwal said rising imports from ASEAN countries and China, especially post Covid-19, is one of the biggest. With imports rising 34% in the last year alone, the imported price almost $100 less per tonne and products with quality defects and non-standard sizes are entering, IPMA has represented the government to introduce an anti-dumping duty. Here are some of the key challenges that industry stakeholders must address to ensure sustainable growth and competitiveness.
High raw material costs
One challenge India’s fine paper and packaging board producers are grappling with is high raw material costs. Be it waste paper, imported pulp, or wood chips, the cost pressures are significant.
The rise in raw material expenses has prompted producers to increase the prices of their final products. Fine paper and recycled board in particular have experienced notable price surges. While this adjustment is essential for sustaining profitability, it also presents a hurdle in terms of market acceptance.
Containerboard sector issues
India’s containerboard sector (kraft grades) has also been facing several challenges recently, including surplus capacity, volatile raw material scenarios, and outdated machinery.
The adoption of advanced and efficient machinery is essential for overcoming some of these issues as it can help optimize their operations and remain competitive. Despite the current challenges, the prospects for containerboard in India are promising. The domestic market is growing, and with the right strategies, producers can capitalize on opportunities in this sector.
Container freight rates
Soaring container freight rates have also significantly contributed to the demand for price hikes in board mills. The increased shipping costs have subsequently impacted the overall supply chain, necessitating adjustments in product pricing.
High imports of paper and paper products
The Indian paper industry is grappling with a significant challenge from imported paper. According to the latest data from the Directorate General of Commercial Intelligence & Statistics (DGCI&S), the volume of paper and paperboard imports in India surged from 1.145 million MT in 2021-22 to 1.436 million MT in 2022-23, reaching 1.929 million MT in 2023-24. This represents an increase of over 68% in just two years.
Notably, imports from China have skyrocketed by 181% over the past two years, while those from ASEAN countries have surged by an astounding 247%. The duty-free import of paper into India has made domestic paper production uncompetitive, posing a serious threat to the sustainability of the Indian paper industry.
Opportunities to capitalize on
Despite challenges, the Indian pulp and paper industry offers significant growth opportunities through emerging trends and strategic investments.
Surge in demand for recycled board
Demand for recycled board is rising due to economic recovery and increased industrial activity. Customers recognize the value of recycled board, leading to sustained demand even at higher prices. Coated board grades are also expected to see price increases.
Booming flexible packaging market
India’s flexible packaging market is thriving, driven by a growing middle class and rising export demands. This growth allows producers to broaden their product offerings. Flexible packaging’s durability and lightweight design make it ideal for perishable goods, while innovations like resealable closures cater to consumer preferences for convenience.
Decor and absorbent kraft grades
The growing real estate market presents substantial potential for décor and absorbent kraft grades. Much demand is currently met through imports, offering local producers a chance to provide competitive, high-quality products. Décor paper sales in India are projected to reach USD 448.5 million by 2033, with a CAGR of 7.2%.
Final word
India’s pulp and paper industry stands at a crossroads filled with opportunities for growth amidst significant challenges. On one hand, emerging trends and increasing demand for sustainable products present valuable opportunities for expansion and profitability. On the other hand, issues such as rising raw material costs, competition from imports, and the need for technological advancements pose significant challenges. As consumer demand continues to evolve alongside economic growth, those who adapt swiftly will be well-positioned to thrive in this vital sector of the Indian economy.
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