With Q1 results coming in for FMCG companies and our Q1 reviews that estimate the current year’s capacity creation for packaging offset presses and narrow web flexo label presses in this issue of August 2022, it is time for us to look at the economy’s and industry’s growth for the year. The capacity creation for all packaging categories continues apace (for flexible packaging it never slowed down even during the pandemic years). For paperboard packaging and the label industry, the coming year’s expansion speaks to pent-up capacity creation stemming from the ambiguities of the past two years.
Capital equipment from Europe especially costs more because of the increase in the price of raw materials, supply chain disruption, and energy costs. Delivery times are also abnormally extended and with the Rupee devaluation and US Fed raising its rates, it may be better to order now than later. Capacity creation is risk-taking in anticipation of demand growth and for our industry, in India, the growth is extremely likely – although when and how much – can sometimes slip marginally.
A leading label press manufacturer assures us that the economic growth is in double digits and we believe that he is not just speaking in terms of nominal growth (which includes inflation). But from his expectations of demand for Indian manufactured label presses in the current year.
TN Ninan, the respected and outspoken economic journalist writes in the Business Standard on 30 July 2022, that for “its macro-economic performance in 2020 and 2021, and the IMF’s forecasts for 2022 and 2023, Turkiye averages annual growth of 5.1% – which beats everybody else for those four years.
“According to the IMF’s data set for 30 highlighted countries, China is next best to Turkiye with average growth in 2020-2023 put at 4.55%, followed by another surprise: Egypt, with 4.3%. India comes fourth with 3.9% followed by (and you will have difficulty swallowing this) the crisis hit Pakistan, with 3.6%. With Bangladesh already an outstanding performer on the growth and development parameters, it would seem that the Islamic world has produced quite a few winners.”
Ninan writes further in his editorial, “As for India’s record, it did poorly in the first pandemic year (fiscal 2020-21), having already slowed sharply in the previous year. But it achieved amongst the fastest recoveries subsequently. And taking the IMF’s projections for the next two years, the economy is set to be the fastest-growing among the Institution’s select list of 30 countries. Average growth this year and the next year is put at 6.8%. The IMF’s optimism is shared by many multilateral and private forecasters. Some domestic analysts have gone so far as to project medium-term growth as high as 7-8%.”
IppStar’s professional industry analysis and projections bear out the IMF’s optimism for the current year. (For the afterword on cyclical downturn read the Ninan piece.) This is partly because we see the three verticals that we research, publishing, printing, and packaging as a continuum. Projects cannot easily be conceived or executed within any particular fiscal year. Machines on order can rarely be delivered in time to be commissioned by 31 March to enjoy the full depreciation benefits.
The building of new plants and installation of capacity creation takes a long time and thus for the packaging industry, especially the large film extrusion lines, these continued during the pandemic in India. We recently visited the new Avery Dennison plant in Greater Noida that bears out the long-term growth and investment in our industry. Our recent visit to the Echaar factory in Ambernath also built during the pandemic – reflected the same long-term vision and compulsion. Thus while the economy is a complex composite and difficult to understand, our industry is however a comprehensive vector, where commerce, social good, and growth seem to coincide (mostly). Maybe there is something to be learned from our industry for the economists too, for us it is certainly a window to the country’s ambitions of modernity.