Policy interventions, market/product diversification key to future of Indian plastic exports: Report

0
121

Drip Capital, a US-based trade finance company leveraging technology to offer innovative working capital solutions, in association with the Plastic Export Promotion Council of India (PLEXCONCIL), has released a report detailing India’s plastic exports sector. Drawing insights from proprietary data and on-ground conversations with exporters, the report analyses India’s plastic exports against the backdrop of rising international trade tensions and a slowing domestic economy.

Some of the key findings of the report:

  • India is the 17th largest plastic exporter in the world and exported US$8 billion worth of plastics (under HS 39), in FY 2019, out of a global market of $600 billion.
  • With steadily rising global demand, India’s plastic exports have grown at a CAGR of 11-12%, with nearly 65% of these exports coming from MSMEs.
  • Gujarat has dominated plastic exports from India, courtesy industry-friendly policies like low power rates, incentives, etc. However, other top exporting regions like Maharashtra have seen growth slow down, leading to fears of stagnation in the sector.
  • The US decision to revoke GSP benefits to Indian goods has hit several plastic exporters, but opportunities provided by the US-China trade war could offset this setback.
  • There is an urgent need for policy interventions in the sector, in the form of incentivization for technology upgradation as well as research into environmentally friendly alternatives like biodegradable plastic.

Stakeholders are targeting plastic exports worth US$25 billion by 2024-25. An ambitious target, this positions plastic exports as a key focus sector for achieving the government’s

$5-trillion-economy target. Gujarat and Maharashtra currently contribute 60% of all of India’s plastic exports; however, while Gujarat’s exports have grown 15% y-o-y in the last four years, Maharashtra’s volumes have stagnated. Other notable exporting territories include Madhya Pradesh and West Bengal and the Union Territories of Daman & Diu and Dadra & Nagar Haveli.

The US and China are traditional importers of plastic that have shown high growth in recent years. The recent trade tensions between India and the US post the removal of GSP benefits for Indian goods have created uncertainty about future plastic trade between the two nations. However, data show that contrary to popular belief, Indian plastic exports to the US have grown, even as overall plastic exports from the country have declined. This is a hopeful sign for the sector’s future. Southeast Asia, Africa and Latin America are other markets rapidly developing markets that exporters should explore in the coming months to boost their shipments.

A key finding of the report has been the need for policy interventions in plastic exports, in the form of incentivization for technology upgrade, like the policies adopted in sectors like apparel. Sribash Dasmohapatra, Executive Director, PLEXCONCIL says, “Investment in new state-of-the-art machinery has helped exporters decrease their labor costs by 70-80%. However, this investment often must be made at the expense of working capital for fresh orders. A government subsidy for this technology upgrade would be extremely helpful to the exporters.”

Another major factor to consider is the impact of plastic bans in various countries around the world and rising environmental consciousness among consumers. Pushkar Mukewar, Co-founder and Co-CEO, Drip Capital explains, “Many countries, such as France and China, have banned certain plastic goods entirely, necessitating a shift away into other possibilities like recyclable and biodegradable plastics. Exporters need to explore these options in greater detail, while also pushing government and other stakeholders to undertake research and policy measures into the sector.”

Drip Capital’s report forecasts subdued growth for plastic exports in the coming quarters. However, policy intervention and market diversification offer solutions for beleaguered exporters and can help the sector achieve stability and regain growth in the long-term.