As planned, inflation in the Indian market is moving towards the 4% target. This needs to be closely monitored to understand the impact on domestic base oils and hence lubricant prices.

1. High Growth in Industrial Lubricants Driven by Higher Investment in Manufacturing and Infrastructure Development

• Increased Demand: The allocation of 3.4% of GDP for infrastructure development, leading to improving India’s logistical efficiency with the creation of permanent infrastructure, including the development of industrial parks in or near 100 cities and 12 under the national industrial corridor program, is expected to significantly boost the industrial lubricants market.
• Market Expansion: The nationwide distribution of industrial parks offers lubricant companies new expansion opportunities, potentially reducing logistical costs and improving delivery times due to closer proximity to various markets.
• Rural Market Potential: Pradhan Mantri Gram Sadak Yojana – Phase IV aims to enhance rural connectivity, likely boosting automotive sales and, by extension, the demand for automotive lubricants in rural areas, while also facilitating broader distribution reach for lubricant suppliers.

2. State-specific Growth

Some growth pockets can be identified among the states to tap the expected development:

• Andhra Pradesh with the planned development of the Visakhapatnam-Chennai industrial corridor.
• Amritsar Kolkata Industrial Corridor with the development of an industrial node at Gaya.
• Planned Tourism Growth in Orissa, and Bihar

 3. Green Energy and Climate Finance

• Clean Energy Transition for Industries: Financial incentives are encouraging micro and small industries to adopt cleaner energy sources, shifting lubricant needs towards more specialized and niche lubricants that align with these technologies.
• Solar Energy Emphasis: The PM Surya Ghar Muft Bijli Yojana underscores the shift towards solar energy. While solar panels do not require lubrication, various components of solar systems benefit from specialized lubricants, such as speciality greases and corrosion inhibitors, to enhance performance and durability.
• Climate Finance Taxonomy Development: Finance Minister Nirmala Sitharaman is set to create a climate finance taxonomy to boost investments in climate resilience and emission reduction. This will promote funding for sustainable technologies such as biodegradable lubricants and low-emission products crucial for sectors like shipping and aviation (hard-to-abate). The initiative is expected to drive innovation and research in the lubricants industry to meet new environmental benchmarks.

4. Impact of Customs Duty Exemptions on Critical Minerals on the EV Segment and Lubricant Industry in India

Lower import costs will attract investments, leading to the establishment of new manufacturing plants and R&D centres, supporting the rapid growth of the EV ecosystem due to critical minerals like Lithium getting cheaper. Consequently, the adoption of EVs will increase in India as the cost comes down. This will lead to opportunities for innovation like the development of advanced fluids and lubricants tailored for EV components, such as thermal management fluids for batteries and specialized greases for electric motors.

5. Impact of Increased BCD on Ammonium Nitrate and Plastics on Lubricants and Allied Industries

The increased BCD on ammonium nitrate and plastics will pose challenges for the lubricants industry, including higher production costs and potential price hikes due to the increase in the cost of plastic. Companies will need to adapt by sourcing locally, innovating with alternative materials, and emphasizing sustainability to maintain competitiveness.

6. Impact of Extended Export Period on the Lubricants Industry

The extension of the export period for goods imported for repairs from 6 months to 1 year in the domestic aviation and boat & ship maintenance, repair, and overhaul (MRO) sectors can have several implications for the lubricants industry. The extended export period will foster growth in the domestic lubricants market by increasing demand as vessels will have to be maintained for a longer time and foreign customers will be attracted to the Indian market leading to a demand increase. Lubricant manufacturers should leverage this change to innovate and expand their product offerings, particularly in the aviation and marine sectors.