With the budget offering little to the chemicals industry it is time to pile on to the rural rickshaw and hope for a trickle down efect from the enhanced spending that the government has planned in this part of India.
Photo by BriceFR
This is entirely possible. More money in the hands of the rural population through various schemes including one that offers guaranteed employment should boost demand for a wide variety of products. We have already experienced the power of the rural market. During last year's crisis, demand from the rural population had saved many companies.
Another plus should be the increased allocation of funds for the Jawaharlal Nehru National Urban Renewal Mission (JNNURM). This programme will among other things, invest in new water and sanitation pipes in 65 cities around the country. It is estimated that investment in each city would result in 4000-5000 tonnes of additional polymer demand for pipes.
But I was surprised at the government's decision to double excise duty on manmade fibres (polyester, acrylic and nylon) and yarn to 8% especially as the industry has been pushing hard for a level playing field with cotton. They had been asking for removal of excise and customs duty on these fibres.
The increase comes at a time when the textile industry has been battling hard to overcome reduced demand from the export market. The move, big negative for companies such as Reliance Industriesand Indorama Synthetics, has drawn strong criticism from the industry. But is the government listening?
The government also appears to be paying scant attention to yet another demand - removal of 5% import duty on naphtha used for polymer production.