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How the 2018 union budget impacted the packaging and printing sector

  • Highlights

  • The Indian packaging industry is expected to grow to Rs. 2.27 lakh crore by 2020

  • The sector is a source of input for several industries

  • A GST reduction on ethanol, lowered input costs for the industry

Be it Fast Moving Consumer Goods (FMCG), retail or pharmaceutical and construction sectors, all the sectors require safe and secure packaging and printing. With the printing and packaging industry growing at a tremendous rate and the interim budget around the corner, let’s find out how the previous budget impacted this sector.

The Indian packaging industry

According to the Indian Institute of Packaging, the packaging industry in India constitutes as much as 4% of the total global packaging industry and is expected to grow to Rs. 2.27 lakh crore by 2020.

Raw materials and finished products

The printing and packaging sector is relevant to almost every industry. But it is most commonly found in:
a) Fast Moving Consumer Goods (FMCG) products
b) Pharmaceutical products

Every product from these industries (and their sub-industries) requires adequate printing and packaging. Medicines, for instance, cannot go out to the market without correct labelling and bundling.

Therefore, any prominent announcement in the budget regarding these sectors could either benefit or hurt the industry as well. So, would any budgetary announcement regarding the raw materials used in the printing and packaging industry. Crude oil and ethanol are significant input materials to produce packaging goods.

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Impact of budget

The Union Budget for FY18-19 did not mention any direct measures for the FMCG or the pharma sector. People were expecting the government to announce 100% FDI in single-brand retail, but this did not happen. However, the budget included a reduction in corporate tax to 25% for Medium, Small & Micro Enterprise (MSME) companies with turnover up to Rs. 250 crore.

This welcome move not only affected retailers, but also the printing and packaging sector. This decision would increase the investments in the sector and establish stronger linkages between consumers of rural and urban India according to experts. Moreover, greater penetration into rural India would help boost sales for the packaging sector.

On the input side, ethyl alcohol or ethanol is a key element used to manufacture packaging products. However, there has been a shortage regarding the production and distribution of ethanol. This is why a rise in ethanol prices due to higher demand complicated matters for the packaging sector.

Although there was no announcement in the budget regarding these issues, the government announced a reduction in GST rate, on ethanol, from 18% to 5%, later on in the year. This helped to lower input costs for the sector in a big way.

Conclusion

The packaging sector is indispensable to the economy, but it may have to take a different turn over the next few years. This is because plastic is a key packaging product used by many industries including pharma, FMCG and retail. However, there has been growing environmental concern over the past few years regarding the usage of plastic. It has been reported that India generates as much as 25,940 tonnes of plastic waste every day according to a report by the Economic Times. As a result, companies are looking at feasible and environmental-friendly options.

Business loans up to Rs. 30 lakh from Bajaj Finserv not only help companies to take care of their regular cash flow requirements but can also help explore newer options for the future. They help companies to leverage growth opportunities and meet the varied demands that come with it. Buying new assets, increasing staff sizes, renovating buildings or advertising require funds, a business loan can help to cover all these requirements without touching the operational funds of the company.

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