Mumbai, 17th March, 2025: The Indian paper industry has been navigating a complex landscape of challenges and opportunities as per a new report by CareEdge ratings. It is poised for gradual turnaround despite recent challenges in FY24 and 9MFY25 in which it faced acute margin pressures due to rising imports and raw material costs. However, with expected stabilization of wood pulp prices and moderation in imports, operating margins are projected to improve by about 200 basis points in FY26.
“The Indian paper industry is at a critical juncture. While challenges like rising imports and raw material cost inflation have strained margins in FY24 and 9MFY25, the sector is poised for recovery. Stabilization of costs and strong demand drivers will support margin improvement by FY26. To remain competitive, manufacturers must focus on modernization, cost optimization, and sustainable packaging innovation,” said D. Naveen Kumar, Associate Director at CareEdge Ratings.
The paperboard and packaging segment, which contributed 55% of industry revenue in FY24, grew by 8.2% driven by e-commerce and the ban on single-use plastics. Additionally, the printing and writing paper segment is set to benefit from the National Education Policy (NEP) 2020 and increased government spending on education, positioning the industry for long-term growth.
In FY23, the sector experienced significant growth in net sales realizations (NSR), driven by pent-up demand post-Covid and the return to office culture. However, this surge was temporary, with sales realizations moderating thereafter. Post-FY22, paper imports from China and ASEAN countries surged, making India a net importer in FY24 in terms of volume. Duty-free imports under Free Trade Agreements (FTAs) with ASEAN and South Korea further impacted domestic production. In FY24, domestic paper production fell by 5.1%, with another 1-2% decline expected in FY25.
The ongoing rise in imports throughout FY24 has increased pressure on domestic manufacturing. The combination of lower sales price realizations and rising input costs led to a projected revenue decline of 3-4% for domestic paper companies in FY25. Domestic wood prices reached unprecedented levels due to increased demand from other industries and reduced plantation activity during Covid. Hardwood pulp prices rose by 20–25% in FY24 and 9MFY25. Domestic manufacturers struggled to pass on these costs due to competition from cheaper imports.
The paperboard and packaging segment, contributing around 55% of the industry’s revenue, grew by 8.2% in FY24. This growth was driven by e-commerce demand and the ban on single-use plastics, promoting paper alternatives. The tissue segment, driven by health and hygiene awareness, grew the most at 13.3%, followed by Cupstock at 10.5%. However, these segments account for only 4% of domestic consumption. With India’s FMCG market projected to grow 7% annually from FY25-FY27, demand for paper and packaging is set to rise further.
The Union Budget’s focus on manufacturing and MSMEs is likely to boost demand for paper and packaging materials, aligning well with the industry’s growth prospects. However, the surge in paper imports from countries like China remains a concern, with imports rising by 44% in the first half of FY25. The industry has urged the government to increase the basic customs duty (BCD) on paper imports to provide a level playing field for domestic manufacturers.