Packaging as a vector and window to economic growth and modernity
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.
The Covid-19 pandemic led to the country-wide lockdown on 25 March 2020. It will be two years tomorrow as I write this. What have we learned in this time? Maybe the meaning of resilience since small companies like us have had to rely on our resources and the forbearance of our employees as we have struggled to produce our trade platforms.
The print and packaging industries have been fortunate, although the commercial printing industry is still to recover. We have learned more about the digital transformation that affects commercial printing and packaging. Ultimately digital will help print grow in a country where we are still far behind in our paper and print consumption and where digital is a leapfrog technology that will only increase the demand for print in the foreseeable future.
Web analytics show that we now have readership in North America and Europe amongst the 90 countries where our five platforms reach. Our traffic which more than doubled in 2020, has at times gone up by another 50% in 2021. And advertising which had fallen to pieces in 2020 and 2021, has started its return since January 2022.
As the economy approaches real growth with unevenness and shortages a given, we are looking forward to the PrintPack India exhibition in Greater Noida. We are again appointed to produce the Show Daily on all five days of the show from 26 to 30 May 2022.
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