The print and packaging industry (according to our own back of the envelope survey) is not yet experiencing any significant upward take-off in demand. However, capital investments continue, and are as usual in various stages of capacity expansion and utilization – the planning, execution and realization of a major investment or plant may take eight or nine quarters across three financial years. The pace of investment and project execution still depends more on financial arrangements, permissions and construction than on finding an ideal time for demand to rise.
Nevertheless, our industry respondents feel that policy paralysis has decreased and corruption could decline with the attempt to adopt more transparent transactional and decision-making processes. Most respondents suggest that although the current quarter and even the next may continue to reflect some of the weaker Q4 and FY 14-15 results reported thus far, there is every likelihood of an inflection in demand two or three quarters down the line.
A Mint study of 142 companies among the BSE 500 index (excluding energy, banking and IT companies) of results of the January to March quarter of 2015 shows that India Inc
grewat a rate of 5.1% – the slowest pace since thequarter ended June 2011. Aggregate net profit in the quarter fell 11.8% – the worst showing since September 2013. The Sensex which rose from 21,189 in March 2014 and crossed 29,000 in February 2015, begana decline inMarch2015 touching 27,324 on15 May 2015.Although the tax collection target has been missed by Rs 2,288 crore the gross tax collection has risen by 9% to Rs 124,50,37 crore, while the fiscal deficit target of 4.1% of GDP has been bettered at 4% for FY 14-15.
The environment challenge
Nevertheless, the packaging industry has continued to grow well above the GDP growth rate – double digits in value if not in volume despite over-capacities in some segments. Investment continues unabated despite pressures on margins and both brand owners of consumer product companies and converters keep growing. There is concern however on the regulatory curbs on PET packaging in pharma applications. With the National Green Tribunal threatening curbs on plastic packaging to reduce the choking of drains and water bodies, plastic packaging could bear more heat in coming days.
Unfortunately India does not have a structured waste management road map or well defined recycling policy – for which both the Government and industry are to blame. According to a report of the Central Ground Water Board, 50% of the groundwater in India’s rapidly depleting water table already has a high amount oftoxicity including fluorides and arsenic. The growth of the agriculture sector it self depends to a large extent on investment in its rational development. The food supply chain including water resources, farming, sorting, processing and delivery also requires integrated planning. The rational use of agricultural produce needs investment in food processing, as well as in a sustainable packaging ecosystem that includes segregation, collection and recycling.
Thus industry and the Government need to move forward together and create a sustainable plan for the packaging industry that can go into the finer points encouraging a reduce, reuse and recycle policy. The environment challenge to packaging is real and if the industry keeps ignoring it or simply reacting to the regulators’ piecemeal and arbitrary orders the consequences are likely to be disastrous.
