India’s jute sector is set for a sharper rebound this fiscal year, with expected sales volume growth of 15% amid lower fibre costs, improved domestic demand, and a tentative uptick in exports, signalling a healthier outlook after recent challenges.
India’s jute sector is heading towards a sharper recovery this fiscal year after two difficult years marked by weak demand, high fibre costs and squeezed margins. Crisil Ratings expects sales volumes to rise by about 15% after an annualised decline of roughly 10% over the previous two years, helped by firmer domestic demand, a better export backdrop and softer raw jute prices.
The domestic market remains the industry’s main engine, contributing close to 85% of revenue. Crisil said demand at home could climb about 20% this fiscal, reversing a similar cumulative fall over the past two years. That earlier slump was driven largely by a surge in raw jute prices, which manufacturers passed on to buyers and which in turn encouraged some customers to switch to cheaper packaging alternatives.
Export demand is also showing tentative improvement. Growth in downstream industries such as home textiles, lifestyle products and other value-added uses is expected to lend support, while the easing of US tariff pressure from last year’s elevated levels may improve the competitiveness of Indian jute products overseas. Crisil said the combination should help lift revenue as well as production utilisation.
The bigger boost, however, is likely to come from costs. Rahul Guha, senior director at Crisil Ratings, said better crop output has increased the domestic supply of raw jute and pushed prices lower even as imports remain subdued. He noted that raw jute accounts for 60% to 65% of operating expenses, making fibre costs the most important driver of margins. Crisil expects operating margins to widen by about 130 basis points to nearly 9% this fiscal. Argha Chanda, also a director at Crisil Ratings, said the industry could benefit beyond the cycle from growing demand for biodegradable materials, tighter restrictions on single-use plastics and expanding uses in geotextiles, agro-textiles, home décor and industrial packaging.
Balance sheets are expected to stay broadly resilient. Crisil said gearing should improve modestly to about 0.5 times from 0.6 times last year, while interest coverage is likely to strengthen to nearly five times from about four times. Risks remain, especially if the demand rebound loses pace or raw jute prices rise again, but the industry appears set for a healthier year after a prolonged period of pressure.
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