The geopolitical shock: How war in West Asia rewrites India’s plastic economy

The Indian plastics industry, a bedrock of manufacturing, is teetering on a crisis point. Arvind Mehta, the chairman of the All India Plastics Manufacturers Association (AIPMA), confirmed that while end-consumers are already absorbing marginal price hikes, the industry’s real bind will arrive if the war is prolonged beyond March.

The immediate response from manufacturers has been to take fresh corporate orders only with open-ended price revision clauses.

AIPMA has submitted various recommendations to the government, including the release of 20% higher working capital, as was done during the Covid period. AIPMA has requested the government to reduce GST from 18 % to 10%, so that there will be more money in the hands of corporates.

The demand has already slowed 25-30% due to rising prices, and this will decline further if the war persists. The demand slowdown was felt most in the automotive, agricultural and packaging sectors by 25-30%.

The industry is focusing on exports to new markets following the recent signing of free trade agreements. The global trade of finished plastic products is estimated at USD 1.3-trillion, while India’s exports account for USD 12.5-billion, representing just 1% of the global market. The US alone imports plastic products worth over USD 72-billion annually.

The industry is exploring 20 new markets, including Mexico, France, Brazil, Italy, the Netherlands, Japan, the UK and Belgium. This move aims to grow India’s meagre 1% share of the USD1.3-trillion global finished plastic products trade.

The cost pressures are not singular: High crude oil is pushing up critical inputs like PP and ABS, while a weak rupee exacerbates the import bill. This is compounded by a logistical explosion and 40–50% increases in polymer-based components. a spokesperson from Godrej Enterprises Group said, the inability of companies to absorb the full impact of geopolitical tensions, rising logistics costs, and the subsequent surge in polymers and plastics.

Beyond industrial inputs, the geopolitical conflict is also directly impacting everyday consumption patterns. The LPG shortage, also triggered by the West Asia war, has led to a spike in demand for ready-to-eat (RTE) and ready-to-cook (RTC) products.

Data from the business intelligence platform Bizom shows that kirana store value growth for RTE/RTC meals hit 10.6% in the first two weeks of March, a significant jump from 3.2% in the same period last year. This highlights a rapid reorientation of cooking habits as households turn to instant meals to cope with the fuel scarcity.

Retailers confirm this shift, with Chetan Sangoi, director at Sarvodaya Supermarket, noting increased stocking of instant noodles, snacks, and beverages. Ecommerce platforms like Amazon.in and startups like ZOFF Foods are reporting robust double-digit growth, signalling that this convenience-driven shift may become a sustained momentum beyond the immediate crisis.

Amidst this volatility, major corporations are drawing their strategic battle lines. Hindustan Unilever (HUL) has firmly denied any plans to divest its foods business, despite parent Unilever contemplating a sale of its own food division to McCormick. HUL terms its foods division, valued at INR 15,294-crore and accounting for a quarter of its FY25 revenue, as an “important and attractive” segment.

The division accounted for around 25% of the company’s FY25 revenue, making it the second-largest segment after home care, which contributed 37.85% (INR 22,972-crore). With no end in sight to the war in West Asia, FMCG majors will struggle to expand their food offerings and tap the growing potential of segments such as packaged foods.

This stance, which follows HUL’s own demerger and listing of its ice-cream business, underscores a strategic commitment to core segments in anchor markets like India, even as global directives from Unilever CE,O Fernando Fernandez push for a focus on premiumisation and bolder bets in personal care and home care. The HUL denial provides a moment of strategic clarity against a backdrop of general market chaos.