"Paper demand, driven by growing consumerism and e-commerce, ban on plastic usage in several states, rising literacy and continued government spending on education, is likely to outpace planned supply additions in the next couple of years," analyst at India Ratings and Research (Ind-Ra) said.
That apart, analysts at the rating agency believe that the raw material prices are likely to remain under check with increasing farm forestry and limited incremental demand, while decline in coal prices is likely to reduce energy costs. Besides, price hikes taken by domestic paper manufacturers over the past one-to-two years provide cushion to absorb the recent moderation in prices.
"After a strong upcycle in FY18-FY19, paper prices started to moderate in 2QFY20 on subdued global demand. Global pulp prices, which had risen sharply between 2HFY17-1HFY19, have fallen sharply, increasing the threat from imports on improved competitiveness of foreign producers. However, factors such as limited domestic supply addition, healthy backdrop of domestic demand, benign raw material prices and imposition of anti-dumping duties on some products continue to support industry outlook," it added.