Encouraging Growth Potential for the
Indian Paint Industry
The Indian paint and coatings industry is still performing well despite slower
growth due to the global financial crisis.
BY DEVARAJ PARTHASARATHY
CONTRIBUTING EDITOR
The Indian paint industry has been doing well for the past couple of years. In spite of global economic slow- down the industry is performing well. The per capita consumption of paints in India is still low at 1.25 kg
against 51.7 kg in Qatar, 38 kg in Singapore or 25. 8 kg in
the U.S. Even China has a per capita consumption of 2.5 kg
and Sri Lanka 3. 5 kg. India has a long way to go. Therefore,
the future of the industry in India is quite bright.
The size of the Indian industry is approximately 940 million liters valued at approximately $2 billion. The organized sector constituted 54% of the total volume and 65% of
the value.
Over the last ten years, the industry has grown at a compounded annual growth rate (CAGR) of 12-13% and in the
next five years, it is expected to grow at a CAGR of 11-12%.
The industry has a positive correlation with the country’s
gross domestic product (GDP) as both have the same
growth drivers.
DECORATIVE VERSUS INDUSTRIAL PAINTS
India’s paint industry can be classified into decorative
paints, which account for 75% of the market, and industrial paints, which make up the remaining 25%. The demand
for paints is both derived and direct. The demand for decorative paints is a direct demand whereas the demand for
industrial paints is a derived demand.
Decorative paints account for the bulk of the market in
terms of volume and value. The unorganized segment plays
a huge role in the decorative paints segment due to low
technical know-how and a highly scattered market. The
industrial paints segment is dominated by the organized
sector due to its high technology orientation. It is also the
more profitable segment. Charts 1 and 2 depict the composition of decorative and industrial sector.
Most of the organized companies have a nationwide presence with multi-location manufacturing facilities. The companies in the unorganized sector are mostly regional,
spread in and around their manufacturing facilities and
While the decorative segment makes up the bulk of India’s
paint industry—roughly 75%—it’s the industrial coatings
segment that offers the greatest opportunity for paint firms
to grow in the years ahead spurred by booms in the automotive and construction indutries.
deal in low value products.
In the license regime, being restrained by FERA (Foreign
Exchange Regulations Act) and MRTP (Monopolies &
Restrictive Trade Practices Act), most players were not
allowed to increase production capacities until the 1990s.
With liberalization, these shackles were removed and the
industry expanded.
TECHNOLOGY
Indian climatic conditions are not conducive for foreign formulations and modification cost in product formulation is
quite high. As a result, imports are not much of a threat to
Indian players. In the case of industrial paints, major players
already have a tie-up with global players for the latest technology and markets accessible to them. It negates the further
supply from the international markets even after reduction of
import duty from 40% to 15.3% in the last eight years.
