Opportunities and Challenges for the Indian Rubber Industry
Rubber is used in a number of products which are used in different industries. India is the fourth largest consumer of natural rubber in the world and the third largest producer. It is also the fifth largest consumer of natural rubber and synthetic rubber combined. If there is no rubber, there will be no mining, no transport, no household appliances and no energy. This shows the importance of rubber in the growth of an economy. Natural rubber as well as synthetic rubber are used as key raw materials.
Rubber is fundamental to the auto industry and the growth of the auto industry shows a strong potential of growth of the rubber industry as well. India is a booming market and has a base of 720 million consumers across the country. It is the fourth largest tyre market in the world and is the fastest growing passenger car market. Many agencies have projected a GDP growth of 9% until 2020. This growth will be driven by the expansion of the industrial sector. Indians are expected to consumer five times more cars and three times more crude oil. The key drivers of the automobile industry include competitive pricing, growth in infrastructure and a rise in per capital income. The global rubber industry has undergone turbulent decade and the recession has choked off demand. The growth is firming and contributing to an improvement in the confidence. The industrial activity has recovered and global trade has finally picked up which has led to the industry seeing an upward trend.
There are as many as 6,711 manufacturing units operating in the non tyre manufacturing sector in the country. These include tread rubber products, footwear products, foam products, moulded goods, adhesives, gloves, tyre tube and flaps, dipped goods, beltings, auto and cycle parts etc. Indian holds a strong advantage in the global rubber industry. Auto tyres and tubes consume the largest share of rubber in the country at 61% which is followed by Cycle types and tubes at 10%. Further, dipped goods hold a share of 8%, tyre retreading material at 6% and others hold the remaining share in the country.
The industry has numerous strengths. The availability of basic raw materials and testing equipments are a boon to the rubber industry in India. The quality of rubber products are accepted as exports are increasing at a rate higher than 20% year on year for the last decade. Other positive factors include the experience of entrepreneurs and availability of quality technologists.
The biggest challenge faced by the rubber industry is the segregation of the units. Most micro units are yet to be a part of the fast changing scene of business. There are operational challenges, technology priorities, innovation needs, new product development, talent management, cost of material, pressure of price reduction, inventory management, stiff competition and logistic costs. There are many strengths of the industry but the government needs to extent support in order to meet the challenges posed by the free import of rubber products and high cost of interest.
Other challenges include increased imports due to the inverted duty structure which is harming the industry. Policy makers need to focus on the industry to tide over the crisis caused by free import of rubber products. There is a slow shift in high technology equipment caused due to the high interest costs.
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