The Indian economy is poised to regain its position as the world’s fastest-growing major economy, with estimated GDP growth of 13.7% for the fiscal year 2022-2023. This growth is expected to be driven by the industry and agriculture sectors, fueled by strong demand from India’s large domestic market.
In the ceramic industry, India holds a significant position as the world’s second-largest producer and consumer of ceramic tiles, accounting for nearly 6% of global consumption. The industry is divided between the organized sector, which represents around 50% of the market, and smaller regional players comprising the remaining 50%.
The ceramics market in India, including tiles, sanitary ware, technical ceramics, and tableware market is growing at a CAGR of 8.6%. Ceramic tiles dominate the industry with a 68% market share, and the overall ceramic industry is projected to reach EUR 9.8 billion by 2024.
Regarding tableware, the majority of imports are from China, accounting for approximately 72% of the market. The Indian government recently extended the anti-dumping duty on tableware imports from China for another five years, boosting the local industry. This measure imposes a duty of EUR 1 per kg on imports from China, making them more expensive. Additionally, during the pandemic, there was increased demand for home products, leading to a surge in sales of ceramic tableware through various e-commerce platforms.
In terms of ceramic imports, China is the largest source, followed by Indonesia and Germany. China supplies both raw materials and finished ceramic goods, while Indonesia and Germany mainly contribute technical ceramic products. The technical ceramic market in India is still in its early stages, accounting for around 2.2% of the total ceramic market. However, a significant portion of ceramic imports to India consists of technical ceramics, with around 40% falling into this category. Indonesia, Germany, and Japan are the leading contributors to technical ceramic imports.
The “Make in India” campaign by the Indian government has encouraged companies to reduce imports and develop quality products, including technical ceramics. The emphasis on digitization and foreign direct investments (FDI) is expected to drive growth in the electronic sectors, thereby boosting the demand for technical ceramics in India.
The region of Morbi in Gujarat has experienced rapid growth in the Indian ceramics industry, serving as the largest cluster of ceramic production in the country. With over 1,000 production lines, many of which focus on exports, Morbi accounts for more than 90% of the market share for ceramic products. Additionally, many units near the town of Morbi are transitioning from natural gas to propane gas due to changes in pricing.
Overall, the ceramic industry in India is poised for continued growth, driven by domestic demand, government initiatives, and a focus on quality and localization. The industry’s potential, particularly in the areas of tiles, technical ceramics, and tableware, presents opportunities for both domestic and international players.
Growth Drivers:
India is urbanising rapidly, with the urbanisation rate of 2.4% and a share of urbanisation being 35.9% by 2022. Furthermore, it is expected to touch 50.9% by 2047. Urbanisation in India is mainly due to cities’ expansion and people’s migration. Investments are made in housing, road network, urban transport, water supply, power-related infrastructures, smart cities, and other forms of urban management. Urbanisation boosts the demand for residential and commercial construction markets in the country, fuelling rapid growth for the Indian ceramic tiles & sanitaryware market. India is witnessing absolute growth in the urban population, owing to the growing income levels of the middle-class and stable democracy. Moreover, people are migrating to the urban area every year in India, which is expected to form new cities with more population.
The investment growth has created higher housing demand, and increasing housing demand accounts for 70% of India’s total demand for tiles. ~75% of the tile demand comes from the residential segment, ~15% from the commercial space, and ~10% is the replacement demand.
In 2021 and 2022, 13 Mn sq ft of new retail real estate supply entered the country, and another 10.15 Mn sq ft of new Mall supply will hit the tier 1,2,3 cities in 2023. Over 7 Mn sq ft of malls are planned to develop by a single private entity in India, boosting the demand for ceramic products.
The Government of India has launched various schemes and initiatives to support the ceramic industry in India for the development of clusters and for the upgradation of technology.
In a nutshell, increase in disposable income, changes in consumer preferences in terms of designer home aesthetics, bigger sized homes/flats, Institutional as well retail investment in real estate, and Government initiatives for affordable housing are the driving forces of the Indian ceramic industry
Emerging Technologies
The technological advancements in Ceramic production machines and innovations in printing technologies such as 3D printing, digital printing, robotics, and others are expected to offer lucrative opportunities for the market players.
Robotic glazing reduces dependence on manual labour. These are highly advanced robotic systems with sophisticated control mechanisms.
In addition, recycling of solid and liquid, ZLD (zero liquid discharge) plants, and high energy efficiency-rated machines have also started getting preferred considering the rising pollution and increasing natural gas prices.
Similarly, the advent of nanotechnology has revolutionised the ceramic tiles & sanitaryware industry by increasing the shelf life of building materials and making them dirt and bacteria-resistant. Such products are gaining traction across clinics, hospitals, laboratories, and food processing plants, where hygiene plays a crucial role.
Opportunities:
In India, the real estate sector is growing rapidly, contributing to increasing ceramic product demand.
The Tile Manufacturing brands like Kajaria, Ceramics, Somany Ceramics, AGL, Linium Ceramics, and Oriantbell are planning to expand their production capacity in 2022-23
Multiple Ceramic parks are planned in various areas in India, such as Gujrat and Rajasthan. Gujrat Government is planning to set up 15 new ceramic parks. Gujarat Industrial Development Corporation (GIDC) has also announced and taken up the development of a 425-hectare park for ceramics manufacturing and ancillary units.
Indian Government has imposed anti-dumping duty on ceramic tableware imported from China, which indirectly reduces the overall imports of finished tableware from China.
The Ceramic firms are mandated to upgrade their technology to cut down on emissions, and due to India-China political unease, local companies are looking out to source machines from other countries.
Indian companies were extremely price sensitive. Italian companies must evaluate whether they can sell at prices that Indians are willing to pay and may need to adjust their sales models accordingly. For example, some companies sell products in smaller sizes or with fewer features to reflect Indian consumers’ price sensitivities. Also, International firms face unpredictable regulatory and tariff regimes. India has the highest average applied tariff of any G20 country and some of the highest bound tariff rates among World Trade Organization members.
Indian companies are constantly seeking to source Ceramic Machinery elsewhere or source it locally (India’s Self-dependence initiative). The Indian Government announced a massive tax rate cut, lowering the base corporate tax rate to 25% from 30% and 15% from 25% for new manufacturing companies. In addition, the Government of India has offered added incentives for manufacturing firms under the Production Linked Incentives (PLI) scheme for the Ceramics sector.
Most manufacturers in India use a three-tier selling and distribution structure that has evolved over the years. This structure involves Distributors/Importers, Wholesalers, and Retailers.
Due to the high duty structure, supply from Chinese /European manufacturers, and the local Indian competition, the success of the placement of Ceramics Machinery will be tied to how firms can eliminate one of the distribution structures (Importer/Distributor; Wholesaler; Retailer) and gain on the margins.
To succeed in the Indian Ceramics market, firms need to focus on three main factors:
Local Presence (Agent/Distributor/Subsidiary): It is essential for global firms to create a local presence with the help of an Agent, a joint venture with a local distributor, or creating a local subsidiary. The firm’s risk appetite will decide on the business model they choose and how they can eliminate one of the distribution structures to win customers and gain bigger margins.
Service & Reliability: After Sales Service is a very important element for global firms to win contracts with Indian companies. Most of the Chinese and local Indian firms have tie-ups with local partners who provide serviceability and reliability for running the operations.
Affordable Price and Finance/Credit International firms could look at tie-ups with Indian banks and Government agencies to offer financing options for the products offered by them. This will assist Indian firms in upgrading their existing technologies cost-efficiently.