Indian Rubber industry- An overview: India’s progress and major trends for 2021
India’s rubber business has grown into a significant part of the country’s economy. India ranks third and fourth in worldwide rubber output and consumption, respectively.
The rubber industry is an important part of India’s economy. India is the world’s third-largest producer, fourth-largest consumer of natural rubber, and fifth-largest natural and synthetic rubber consumer.
The commercialisation of the Indian rubber industry began in 1902 when forward-thinking Indian farmers realised the benefits of rubber as a financially viable crop. Large estates initially dominated the industry structure, which ultimately disintegrated into a multitude of tiny holdings.
Over 76% of rubber estates are currently smaller than 200 hectares, and nearly 34% are smaller than 40 hectares. With over 6000 production units, the rubber manufacturing business is divided, with 30 large-scale, 300 medium-scale, and around 5600 tiny units. The industry employs 400,000 people and generates an estimated $5.6 billion in revenue.
India has progressed as a natural rubber exporter.
Natural rubber exports and imports have been oscillating over the last four years. The amount of rubber exported and imported is determined by various factors, including production, local consumption, stockpiles held, and the difference between international and domestic rubber prices.
Manufacturers primarily target exports to take advantage of pricing differences between domestic and international markets and eliminate built-up inventories when the home market is slow. In light of the foreign market’s uncertainty, government policies about the rubber industry were created primarily to assist and enable the domestic market to grow.
The major consumer of natural rubber is the automobile sector.
The automobile industry is a major user of natural rubber in the form of vehicle tyres, tubes, and other parts and accessories and has emerged as the single-largest consumer of natural rubber across the globe. Automobile tyre account for approximately half of all rubber consumption worldwide, with bicycle tyres and tubes accounting for 15%, rubber footwear for 12%, and industrial belts and hoses accounting for 6%. Rubber is used in a wide range of products. Therefore the demand for the material is driven by both industry growth and consumer demand. As a result, per capita, rubber consumption is a useful metric for comparing rubber markets.
Factors that influence the rubber business.
The demand for Rubber is determined by a few core categories and any factor or trend affecting these could significantly impact the rubber business. Rubber is also a commodity. Thus its price has a big influence on demand and output. The following are some of the most important elements that can influence rubber demand and production.
- Growth in the automotive industry.
In India, the vehicle sector is expanding at a healthy rate of approximately 15% per year, and this trend is projected to continue in the coming years. Passenger vehicle sales have surpassed 1.5 million units per year, while two-wheeler sales are approaching 8+ million units per year.
While these figures are significant, they nevertheless suggest a low degree of penetration. For example, passenger car penetration in India is only approximately 7 per 100 inhabitants, significantly lower than in other developed and developing countries. These figures show that India’s vehicle sector has enormous growth potential.
Over the last many years, India’s income levels and consumer expenditure have steadily increased. By 2010, the consuming class (those with an annual income of more than US$ 980) is expected to account for over 80% of the population.
Over the next 20 years, household discretionary income is predicted to expand at a CAGR(Compound Annual Growth Rate) of 5.3%. These patterns suggest that demand for consumer durables, many of which contain rubber components, will continue to expand in the long run. Demand for consumer durables will lead to increased manufacturing, thereby increasing the demand for rubber for industrial purposes.
- Government rules and regulations.
Government measures promoting investment and exports, as well as quality and R&D, have a significant impact on rubber prices and profitability. Subsidies, port restrictions, tax incentives, custom duties, and other regulations are among them. The Indian government has taken the initiative to develop a sound regulatory framework for the rubber industry and provide significant support for its expansion.
Natural rubber export promotion was selected as a thrust area in the Tenth Plan.
The Rubber Board is also working on bringing rubber plantations into the Kyoto Protocol’s carbon trading framework. This would necessitate international cooperation as well.
Efforts and actions to develop new uses for natural rubber and improve its quality by mixing and evolving composites are encouraged.
The factors and trends affecting India’s rubber sector and the industry’s increasing integration with global markets indicate some major areas that Indian rubber manufacturers must address to sustain their competitiveness.
Rubber plantations can be primarily found in Kerala, Tamil Nadu, Karnataka, and the North-Eastern provinces of India. Players will benefit from being close to plantations and having ready access to raw materials to reduce logistics, prices, and time. This can give a competitive advantage in the Global price-sensitive market.
Quick response to market fluctuation
The rubber market is cyclical, with production varying month to month and lowest during the rainy season. The demand for rubber varies depending on changes in the user sectors and the price of rubber. A fundamental capability for enterprises to prosper in the industry is watching the market, anticipating changes, and adapting promptly.