The Indian paint industry, valued at over ₹700 billion, is poised for growth, driven by increasing infrastructure development, urbanization, and a rising middle class. However, despite its promising prospects, the industry faces numerous challenges. Rising raw material costs, stringent environmental regulations, and intense competition from domestic and international players threaten profit margins. Moreover, the industry's high dependence on crude oil and volatile global market trends further exacerbate these challenges, demanding innovative strategies and adaptability from industry stakeholders to remain competitive.

1. Raw Material Price Fluctuations and Supply Chain Disruptions:

One of the primary challenges faced by the Indian paints and coatings market is the volatility in raw material prices and frequent supply chain disruptions. The key raw materials used in paint formulations include pigments, resins, solvents, and additives, many of which are sourced globally. India, being heavily reliant on imports for certain essential chemicals, faces risks when international suppliers face disruptions or when global raw material prices fluctuate. This issue has been exacerbated by factors such as trade tariffs, geopolitical tensions, and the COVID-19 pandemic, which has disrupted global logistics and manufacturing systems. The price volatility of raw materials can significantly impact production costs for paint and coating manufacturers. For instance, the prices of key chemicals like titanium dioxide (used for white pigments) and acrylic resins can vary due to supply-demand imbalances in global markets. When prices of these materials increase unexpectedly, manufacturers are often forced to absorb the cost increases or pass them on to customers, which can affect profitability and consumer demand. In the case of passing on higher costs, it may also result in reduced sales, particularly in price-sensitive markets or during economic downturns. Moreover, supply chain disruptions further complicate the situation. Inconsistent supply of raw materials, due to logistical delays, container shortages, or interruptions in international trade routes, can hinder manufacturing operations and delay product delivery to the market. For Indian manufacturers, this challenge is heightened by the country's reliance on imports for specific materials that are either not available domestically or are more expensive when sourced locally. This dependency not only impacts production timelines but can also affect the availability of specialized coatings for various industries like automotive, construction, and marine.

To mitigate these risks, companies need to adopt better supply chain management practices, diversify their sources for raw materials, and explore domestic production options. Moreover, establishing strategic partnerships with suppliers and utilizing advanced forecasting and inventory management systems can help buffer against unexpected price hikes and delays. However, given the current global economic climate and the growing demand for paints and coatings in India, managing raw material costs and ensuring stable supply chains will remain a significant challenge for the foreseeable future.

2. Environmental Regulations and Sustainability Concerns:

Another challenge facing the Indian paints and coatings market is the growing pressure to comply with stringent environmental regulations and adopt sustainable practices. The Indian government, alongside international bodies and environmental organizations, is increasingly focused on reducing the environmental impact of industrial activities. The paints and coatings industry, traditionally associated with the use of volatile organic compounds (VOCs), solvents, and toxic chemicals, faces increasing regulatory scrutiny on its environmental footprint. VOCs, which are emitted during the application and curing processes of many paints, contribute to air pollution and pose significant health risks. In response to these concerns, the Indian government has introduced regulations aimed at limiting VOC emissions from paints and coatings, especially in urban areas where air quality is a growing issue. Additionally, the government's push for sustainability and clean technologies has led to the adoption of more environmentally friendly paints, such as water-based or low-VOC paints, which are perceived as safer for both consumers and the environment. Manufacturers are now expected to develop products that comply with these new standards, requiring substantial investment in research and development. Furthermore, global consumer trends are shifting towards sustainability, with customers increasingly preferring eco-friendly products. This change in consumer behavior is pressuring Indian paint companies to innovate and adopt greener practices. The growing demand for sustainable solutions, such as biodegradable paints, recyclable packaging, and products made from renewable resources, is pushing companies to rethink their production processes. While this shift presents opportunities, it also creates challenges for companies that are either unwilling or unable to invest in the necessary technology to meet these new demands.

Transitioning to environmentally friendly products and processes often requires significant investment in R&D, sourcing of alternative raw materials, and modifying manufacturing facilities. This can lead to increased production costs and higher prices for consumers, which may impact demand in a price-sensitive market. Furthermore, achieving a balance between sustainability and maintaining product quality and performance is an ongoing challenge for manufacturers. Companies must ensure that eco-friendly alternatives do not compromise the durability, functionality, or appearance of the coatings. To address these challenges, Indian paint manufacturers are increasingly investing in developing low-VOC and eco-friendly alternatives, exploring bio-based raw materials, and improving waste management practices. However, the evolving nature of environmental regulations and consumer expectations means that the industry will need to continue adapting and innovating to stay competitive and comply with these sustainability requirements. This challenge will remain a critical area of focus for businesses in the Indian paints and coatings market in the years to come.

3. TiO2 issue

The paint & coating industry is the major end-use industry for titanium dioxide (TiO2). Titanium dioxide pigment, forming around 25 per cent of the total content of paint, is by far the most important material used by the paint & coating industry due to its whiteness, opacity and refractive index ability i.e. its ability to bend and scatter light. It is commercially available in two forms - Anatase and Rutile. Of these two forms, Rutile TiO2 is more durable and stable and is also considered to be more efficient in scattering light; while anatase pigments are used mostly in cheap dispersion paints, self-cleaning paints and in road marking paints. Application of rutile pigments is much broader and in practice covers all paint types. Around 70 per cent of India's domestic demand for TiO2 is met through import deliveries and China is the leading exporter of TiO2 to India. Steady growth of TiO2 production in China kept the TiO2 prices in check. Volatility in Rupee has made the imports costlier for Indian paint producers by a similar amount. However, insufficient domestic production of TiO2 is likely to pose problems for Indian paint producers in coming years on account of a ban on mining of beach minerals by the Indian government. Beach minerals ilmenite and rutile are the basic feedstock for the manufacture of TiO2. The Indian government’s ban in 2019 on mining of beach minerals by private companies has affected the whole chain of inter-related connected producer and user industries. Meanwhile, India’s Meghmani Organics (MOL) is likely to double its TiO2 capacity to 33,000 tonnes/year by December 2023 at a cost of around Rs 3.75 billion ($45.98 million). The company’s TIO2 production is mainly targeted at the domestic market. MOL is a leading pigments and agrochemicals producer in India with six production facilities located in Gujarat. 

4. Emerging trend of water-based paint

Water-based paint is one of the most popular and well-known paint types for home applications. This is because emulsion water-based paint is eco-friendly, odorless, and has a wide range of color options. Additionally, it is easy to apply water-based paint with simple brushes and paint rollers. Water-based paints are also called latex paints. They consist of a pigment and a binder with water used as a carrier. Water Based paint is more advantageous compared to oil paint as it Dries faster, is environmentally friendly, Odorless or has less odor, preserves its color over time and Can be cleaned with soap and water. Meanwhile, Asian Paints is planning to set up a new water-based paint manufacturing facility with a capacity of 4 lakh kilolitres per annum at an investment of around Rs 2000 crore. The manufacturing at the facility is expected to be commissioned in 3 years, after acquisition of land. The company is exploring the possibility of making this investment and setting up the manufacturing facility in the state of Madhya Pradesh, subject to grant of requisite incentives by the Government of Madhya Pradesh and such other approvals and clearances, as may be required. The Company would use latest manufacturing technology to produce paints and intermediates in the proposed manufacturing facility in an environment friendly manner

5. Seasonal demand

The demand for decorative paints largely depends on the housing sector and monsoon season, while industrial paint demand is linked to end-user industries like automotive, engineering and consumer durables. Also, the demand buoyancy during festivals followed by the marriage season typically contributes around 25 per cent to 30 per cent to industry sales. Festive paint demand is spread across categories from interior and exterior paints, ranging from premium to economy spectrum, to protective solutions for wood and waterproofing.