Recovering fast from the economic downturn, the Indian economy grew by about 7-8% in 2009 fiscal, with total polymer consumption rising to 7.75-8 mln tpa. The Indian plastic compounding industry witnessed a high growth rate of 10-12%, thanks to high growth rates of the end-user industries, particularly the automotive sector. India is the largest manufacturer of three-wheelers and the fourth-largest manufacturer of passenger cars. India's automotive industry was growing at nearly 15% before the economic downturn and has already showed signs of recovery. Automotive makers worldwide are increasing focus on reduction in weight and ease of handling. As a result, plastics seem set to replace traditional materials and become the key material of construction in the future. As per Frost & Sullivan in ICIS, since the plastic compounding industry is heavily dependent on the automotive sector, launch of new vehicles in the small car segment in India is expected to drive demand in the sector. The key drivers for the Indian plastic compounds market are: • High growth rates of end-use application such as automotive, appliances, wire and cables, that are expected to drive demand. Total car sales in India in the year ending March 2008   rose 11% from a year ago to 1.2 mln and passenger car sales are widely forecast to top 2 mln by 2010. • A rise in the current low per capita usage of plastics from 5.5 kg to catch up with global usage of 12 kg. Plastic components accounts for 20% of a car's weight in Europe, but only   10% in India. • The trend towards increased use of plastics in place of traditional materials such as glass, metal and wood because of the inherent advantage of plastics such as its light weight, ease    of handling, density reduction in the assembly and newer innovations.Use of plastic parts will lead to weight reduction which will make Indian cars more fuel-efficient. • Since India offers advantage of low-cost high-quality manufacturing hub, many multinationals are looking to explore the country, specially in the automotive and appliance segments. • A growing middle class population with rising income and aspirations, following a global consumption pattern. • Development of low cost affordable cars in the country that will use an increasing amount of polymers and compounds. On an average, a passenger car uses approximately 30-40 kg   of PP compounds. Demand for PP in the automotive segment was 50,000 tons in 2005, and is expected to reach nearly 150,000 tons by 2010. PP and polyethylene (PE) are the key polymers used in compounding in India. Acrylonitrile-butadiene-styrene (ABS) and polystyrene (PS) are used more for specialized applications. India's compounding industry can be mainly classified into: • Exclusive compounders of PP and other engineering compounds • Producers of compounds and masterbatches • Wire and cable compounds One of the key factors restraining growth of the Indian plastic compounding market is the inferior performance of current materials compared with metals. The fluctuating price of crude oil is having an impact on the price of plastic compounds and is also affecting their usage. Maintaining profit margins despite fluctuations in raw material prices is challenging for the Indian plastic compounding market. To supply to the automotive industry, the compounders need to be included in the approved vendor list for auto original equipment manufacturers (OEMs) - a long drawn-out process. Hence most compounders have to find a balance between raw material prices and prices demanded by OEMs, which results in their profit margins being squeezed. Suppliers to the auto industry also need to invest in research and development (R&D) to further the usage of PP in new applications, and cater to the requirements of specific customers. With the current low levels of R&D, most end-users turn to imports for certain uses. Consequently, there is a real need to look at developing local technology for local solutions. The masterbatch industry in India is highly fragmented with over 250 players, with major players in the organized sector holding almost 50% of the market. In the compounding industry, about 50% of the market is held by the top 10 players, while the balance is either catered to by imports or by players with smaller capacities. Unlike the integrated players of the West, Indian polymer producers do not undertake the compounding. Since the market is competitive, price and performance are the key attributes. The Indian appliance market is growing at around 10-12% pa, mainly using styrenics and PP. The consumption of PP is expected to rise from 13,000 tons in 2005 to about 30,000 tons in 2010. Since the use of PP in each appliance and brand is different, it is difficult to get the actual consumption of PP compounds in the appliance industry in India. The Indian appliance industry is currently on a downtrend and expected to recover as the economy rebounds. The key applications of the wire and cables market are power and telecommunications, mainly using PE and polyvinyl chloride (PVC). Nearly 50% of the Indian compounding industry is dominated by a few players, including Hydro S&S Industries, Zylog Systems, Machino Basell India, Aalekh Polymers, Kalpena Industries and Shakun Polymers. Multinationals including Japan's Mitsui, Germany's BASF, South Korea's Hyundai Engineering Plastics, and Netherlands-based group DSM Engineering Plastics, are setting up compounding facilities to cater for growing demand. The industry is expected to become more consolidated. Capacity expansions by major players such as Reliance Industries for polypropylene (PP) are expected to further drive the demand for compounds in India. German chemicals maker BASF AG sees business from Asia offsetting a slowdown in the United States, with the construction and automotive sectors driving growth there. BASF’s new engineering plastics compounding plant near Mumbai has been recently commissioned. Lanxess AG is to build a new compounding plant in Jhagadia, to produce its Durethan polyamide and Pocan polybutylene terephthalate materials, with an initial capacity of 20,000 tpa at an investment of over €10 mln. Royal DSM N.V has opened a new manufacturing facility for producing engineering plastics compounds at Ranjangaon for the production of Akulon® PA6, Arnite® PBT and PET and Stanyl® PA46 to cater to molded components for the automotive, electrical and electronics and consumer goods industries. Machino Polymers Ltd. plans to build a 1,000 tpa polypropylene compounding plant in Chennai. This follows the company's expansion in 2008, when it doubled capacity at its Gurgaon plant to 40,000 tpa. India may not be the swiftest of the BRIC (Brazil, Russia, India and China) countries, but growth here has been steady.