New Energy research report from Business Monitor International is now available from Fast Market Research

Boston, MA -- (SBWire) -- 02/14/2013 --The India Petrochemicals Report examines the enormous long-term potential exhibited by the local consumer market while highlighting short-term concerns about a sharp drop in manufacturing exports due to the eurozone crisis. In this report, BMI also examines the way in which producers are grappling with both the short-term risks and ongoing problems associated with land acquisition that have led to significant delays. It also analyses the impact of exchange rate volatility, which is exacerbating the effects of sustained high oil prices on petrochemicals margins.

Indian petrochemicals production was marked by a sharp decline in growth in 2012 in line with broader economic trends. Production indices point to a sharp downturn from previous years and well below the 9.5% average demand growth rate the government has targeted for the petrochemicals market. The investment environment is plagued by institutional problems, such as corruption, lack of legal enforcement and the country's notoriously vague land acquisition rules as well as energy supply and feedstock resources. These are holding the country back from more rapid development of the petrochemicals industry, despite the government's drive to create industrial clusters. For many majors, in spite of the market potential and import tariffs, it still remains more attractive to export to India, and only substantial enticements are likely to encourage investment. The petrochemicals industry is replete with examples of project failures and lengthy delays. Issues include lack of feedstock access, political controversies over land acquisition and mechanical and technical problems. There are further structural challenges ahead, notably imported feedstock requirements which have increased costs as a result of a combination of rising global energy prices and currency depreciation.

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Over the last quarter BMI has revised the following forecasts/views:

- Petrochemicals output growth is well below BMI's previous forecast of 8% and has been revised down to 2.5% for 2012. A return to stronger growth is expected in 2013, but not at the rates the government is targeting. Much will depend on the strength of Indian household spending, which is under pressure due to high interest and high inflation rates.
- Factors militating against growth included the weakening of the Indian rupee, which depreciated by around 15% against the US dollar in 2012, a decline in GDP real growth to around 5.7% from 6.5% in 2011 and a slump in industrial growth, which hit negative territory in mid-2012 with some key consuming industries such as the automotive sector contracting in H1.
- While BMI still anticipates significant growth in the Indian polymers market in the years ahead as packaging, construction and automotive industries raise per capita consumption, there are growing doubts as to whether the domestic industry will be capable of fulfilling this demand.

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