In the month of September, 2016 the Indian Government announced a new policy for the import of marble blocks which has far reaching consequences for the development of the marble industry in India. The new liberalised policy, while still maintaining high import duties, at last made it easy for anyone setting up a factory to import marble blocks. Previously, even to import the blocks of marble there had been so many restrictions and conditions that only a select few were able to navigate their way through the bureaucratic maze and obtain license for importing marble. By bringing the import policy under a Open General License (OGL) category, a long standing demand from many stone companies wishing to set up new factories was finally fulfilled.
Being the fastest growing major economy in the world with a vast population and still a long way to go in development, the potential for growth of this industry in India is obvious. The high import duties means that any finished imported marble will end up being in the premium segment of the market. According to expert estimates the total market for marble in India is around 35 million tons per year and out of this imported marble accounts currently accounts for only 800,000 tons. Under the new policies the market for imported blocks could reach 5 million tons during the next 5 years according to some estimates assuming that 15 t0 20% of the market for marble is in the premium segment. Premium segment here is defined as having price of more than Rs 150/ square foot ( approx. 25 euros/sqm).
The recent demonetisation of high currency notes has, as of February, 2017, provided a major blow to the construction industry in India where payment in cash is a major component, especially in the high end construction in major cities, precisely the segment where imported marble is most used. Since prices of the premium segment construction buildings are expected to drop significantly, some say it could be around 30%, the positive effects of the new policy are likely to be delayed because of a sudden drop in demand and decline in number of transactions. However, most people expect normality to return a year or two later, perhaps earlier. In the meantime, given the vastness and diversity of the market, fast economic growth in the range of 7% of the country’s economy, there are already some new marble factories being set up in different parts of the country.
Before the new import policy was announced there was only one marble factory located in south of India. Currently there around 30 new factories that are coming up, each with 1 or 2 marble gangsaws, the general attitude being a cautious ‘“wait and see” approach. The expectation is at least 50 new marble gangsaws will be set up in the next 12 months, mostly in the Hosur area, already well known for its granite processing industry. The general mood remains one of cautious optimism, the hope being the construction activity will gradually recover. The country’s IT industry is still growing and making investments, and could provide further demand for imported marble processed locally. But other industries all over the country are also expected to start growing faster soon.
In the South of India the market for marble is usually for first or extra choice. Projects tend to go for high quality marble, since land is very expensive especially in the big cities, and expensive imported marble is still a very small part of the total cost.
Ivory and beige colours still tend to be the most popular. Whites are also in fashion in keeping with global trends. Imported marble will probably also substitute granite in some way in the local market, especially in the south of the country.
Over time a much bigger marble processing industry, based on imported marble, with factories located mostly in the coastal areas of India, both on the east and the west coast because of logistical factors, is a likely development. Many new people are expected to enter this industry. The picture will probably become much clearer in around 3 years time.
One possible consequence of the new import policy, according to industry experts wishing to remain anonymous, may well be the disappearance or reduction in purchasing of marble blocks by some companies who previously used to thrive in the controlled business environment where competition was restricted. Some of the previously prominent players may find it difficult to adapt to the new free competition environment requiring a different mindset and probably much lower profit margins. Only time will tell.
For now, following the consequences of the liberalised marble import policy, and possibilities of more government measures favourable to the industry, there has already been a big shakeup in the market, and India remains one of the few promising markets where marble blocks sellers can look forward to increased sales in the future.
(Our thanks to Raghav Reddy, Gurmeet Modi, Vishwanath Reddy and some others for their inputs).
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