The Indian paper industry is set for a gradual recovery despite facing significant challenges such as rising imports and high raw material costs in FY24 and the first nine months of FY25. According to a report by CareEdge Ratings released on Monday, the sector’s operating margins are expected to improve by approximately 2% in FY26, driven by stabilizing wood pulp prices and a reduction in imports.
Challenges in the Paper Industry
The Indian paper industry has struggled with increasing costs and intense competition from cheaper imports. In FY24, the country became a net importer of paper in terms of volume, with a surge in imports from China and ASEAN countries. Duty-free imports under Free Trade Agreements (FTAs) with ASEAN and South Korea further impacted domestic production.
Due to these factors, domestic paper production declined by 5.1% in FY24, and another 1-2% decline is expected in FY25. The combination of falling sales price realisations and rising input costs has led to a projected revenue decline of 3-4% for Indian paper companies in FY25.
Growth in Paperboard and Packaging Segment
Despite challenges, the paperboard and packaging segment has shown resilience. This segment, which contributed 55% of the industry’s revenue in FY24, grew by 8.2%, mainly due to the growth of e-commerce and the ban on single-use plastics. The increasing demand for sustainable and innovative packaging solutions is expected to further support growth in this segment.
Impact of National Education Policy (NEP) 2020
The printing and writing paper segment is set to benefit from the National Education Policy (NEP) 2020 and increased government spending on education. As more schools and institutions implement the policy, the demand for textbooks and educational materials is expected to rise, providing long-term growth opportunities for the industry.
Pressure on Domestic Manufacturers
The rising cost of raw materials has further impacted domestic manufacturers. Domestic wood prices have surged due to higher demand from other industries and reduced plantation activity during Covid-19. Hardwood pulp prices increased by 20-25% in FY24 and the first nine months of FY25. However, domestic manufacturers have struggled to pass these costs onto consumers due to stiff competition from cheaper imports.
Industry Outlook and Future Strategies
CareEdge Ratings Associate Director, D. Naveen Kumar, emphasized that while the industry faces challenges, recovery is on the horizon.
“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 FY25, 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 modernisation, cost optimisation, and sustainable packaging innovation,” he said.
In FY23, the industry saw a temporary boom in net sales realisations due to pent-up demand post-Covid and the return-to-office culture. However, this growth was short-lived, as sales realisations later moderated.
Looking ahead, the industry is expected to focus on cost efficiency, technological advancements, and sustainable practices to regain momentum. With stabilizing input costs and steady demand, India’s paper industry is likely to see a gradual yet strong recovery by FY26.
