Pest Analysis of Paint Industry in India

Topics: Economic growth, Duty, Excise Pages: 7 (2026 words) Published: December 1, 2009

The pest analysis refers to four main factors:


The analysis will focus towards the industry that how the political stability, rules and regulation, and the legal system of the country affecting the overall industry. The economic condition, liberalization, policy toward foreign investment, and growth rate of the economy as a whole also help to analyze the overall industry attractiveness and potential for the growth. The social aspects like people are more involved in the painting process, trend of nuclear family; low interest rate of housing loan, increase of urbanization and change in thinking of the people all this is helpful for the industry consideration, also the change in technology, production process, distribution channel and more use of tinting machine that help for better shading of color.


The analysis of the political and legal environment will consider the following aspect:

Largest Democracy.
Taxation policy i.e. reduction in excise duty and custom duty on raw material and final products. Fair amount of political stability.
Political consensus on economic reforms and higher target of growth of the economy. Sound legal system – a factor contributing large foreign direct investment.

Growth in the early nineties was constrained by high excise duties. After the rationalization of the excise duty structure in 1992 and consequent pick up in industrial growth, the paints segment began posting increasing growth.

Over the last ten years, the industry has grown at a compounded annual growth rate (CAGR) of 12-13% and in the next five years, it is expected to grow at a CAGR of 11-12%. The industry has apositive correlation with the country's gross domestic product (GDP) as both have the same growth drivers.  The finance minister announced that customs duty on titanium dioxide and pigments and preparations based on titanium dioxide will be cut from the current 12.5 per cent to 10 per cent, paint companies were among the largest beneficiaries. Titanium dioxide is a key input in the paint industry and makes up 12-15 per cent of the total raw material costs.

Budget Measures
Excise duty reduced on buses and their chassis, small cars, two wheelers and three wheelers from 16% to 12% and on hybrid cars from 24% to 14%.

Customs duty exemption to be withdrawn on naphtha for use in the manufacture of polymers in order to correct price distortions and revenue losses. Naphtha for use in the manufacture of polymers will be subjected to normal rate of 5%.

Increased emphasis on Bharat Nirman and improving infrastructure.

Budget Impact

Reduction in excise duty on small cars, two wheelers and three wheelers will benefit paint companies, as the prices of cars will decline thereby boosting volumes. •Increased emphasis on bolstering infrastructure in the country is a positive for companies, as it will enhance the performance of powder and protective coatings.

Company Impact

Reduction in excise duty on small cars, two wheelers and three wheelers will benefit Kansai Nerolac and Asian Paints given their strong presence in the automotive paints segment.

Emphasis on improving infrastructure such as roads, capital goods and power will be beneficial to Asian Paints, which has been witnessing strong growth in its powder and protective coatings businesses.


• To give boost to the construction of residential units, the service tax on construction should be removed. • Tax relief on housing should increase.
• Home loan interest rate should be cut.
• The excise duty bracket of 16% for paints to change to 12%, considering the protective aspect of...
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