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Addressing Supply Chain Challenges in the Indian Furniture Industry: Expectations from the Union Budget

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By-Mr. Tushar Verma, Executive Vice President, REHAU

India’s furniture industry, valued at approximately ₹1.9 lakh crore in 2024, is one of the fastest-growing sectors globally. According to the Furniture Industry Outlook Report 2024, this sector is projected to grow at a compound annual growth rate (CAGR) of 13-15% over the next five years. Yet, despite this remarkable growth, the industry faces significant supply chain challenges that hinder its true potential. As the Union Budget approaches, stakeholders in the furniture manufacturing ecosystem are eagerly awaiting measures that could help overcome these obstacles and drive the sector towards sustainable growth.

Polymers Manufacturing Challenges in India
The polymer manufacturing sector in India faces several significant challenges that hinder its growth and global competitiveness. One of the primary issues is raw material unpredictability, as fluctuations in global oil prices directly impact the cost of key inputs, creating financial strain for manufacturers. Additionally, the industry grapples with a shortage of skilled labor, limiting its ability to optimize production processes and adopt advanced technologies. Energy shortages further compound the problem, with frequent disruptions in power supply significantly affecting the energy-intensive polymer production processes.

Another critical challenge is the increasing focus on environmental regulations related to polymer waste, which demands significant investments in research and development to create sustainable solutions. The need to comply with global standards and regulations introduces additional costs and complexities, as manufacturers must align with international benchmarks to remain competitive. Moreover, continuous investment in research and development is essential to innovate polymer technologies, develop new applications, and improve existing products to compete in both domestic and international markets. Addressing these challenges requires a collaborative approach between policymakers and industry stakeholders to ensure the sector’s long-term sustainability and growth.

Sourcing Challenges: Ensuring Raw Material Availability

India’s furniture industry relies heavily on raw materials such as wood, metal, and engineered products like Medium Density Fiberboard (MDF) and Particle Boards. However, domestic production often falls short of the demand. For example, India imported MDF worth ₹3,700 crore in 2024, highlighting the gap in local manufacturing capacity. Additionally, fluctuations in import duties have further increased cost pressures for manufacturers.

To address these challenges, industry leaders are looking to the Union Budget for specific measures:

  • Reduction in Import Duties: Lowering duties on key raw materials will help reduce costs for manufacturers and improve competitiveness in global markets.
  • Incentives for Domestic Production: Extending the Production Linked Incentive (PLI) scheme to furniture components could promote investment in domestic MDF and plywood manufacturing.
  • Sustainability Incentives: Policies supporting the use of certified, sustainable wood and alternative materials like bamboo can reduce the environmental impact and ensure long-term material availability.
  • Logistics Bottlenecks: Bridging the Infrastructure Gap

India’s fragmented logistics network remains a key bottleneck for the furniture industry. As reported by the National Logistics Policy 2024, the average logistics cost in India is approximately 14% of GDP, significantly higher than the 8-10% range seen in developed countries. This inefficiency disrupts the timely delivery of components and finished goods.

Key measures anticipated in the Union Budget include:

  • Investment in Infrastructure: Enhanced funding for multi-modal transport networks, including railways and inland waterways, would help ensure smoother and cost-effective transportation of bulky furniture components.
  • Digitization of Logistics: Incentives for adopting digital platforms for real-time tracking, inventory management, and supply chain analytics could significantly reduce delays and inefficiencies.
  • Warehousing Support: Grants or subsidized loans for setting up advanced warehousing facilities near industrial hubs would improve storage and distribution.
  • Labor Shortages: Bridging the Skills Gap

The furniture manufacturing sector employs over 5 million workers, but there is a severe shortage of skilled labor. According to the National Skill Development Corporation (NSDC) Report 2024, more than 70% of workers in the sector lack formal training, leading to low productivity and compromised product quality. The rise of automation and digitization further amplifies the need for a technologically proficient workforce.

Measures proposed to address labor challenges include:

  • Skill Development Programs: Expanding initiatives like the Pradhan Mantri Kaushal Vikas Yojana (PMKVY), tailored specifically for furniture manufacturing, could enhance worker capabilities in modern production techniques.
  • Incentives for Workforce Retention: Offering tax breaks or subsidies for manufacturers investing in employee training and welfare could improve workforce stability and productivity.
  • Public-Private Partnerships: Collaborations with furniture component manufacturers can create industry-relevant training modules and internships, improving overall skill levels in the sector.

 Rising Expectations from the Union Budget

The upcoming Union Budget is expected to play a crucial role in shaping the future of India’s furniture industry. Key expectations include:

  • Export Promotion Measures: Despite India’s furniture exports contributing less than 1% of global trade, export incentives such as tax rebates and easier credit access could help manufacturers tap into international markets, particularly in Europe and North America.
  • Cluster Development Programs: Establishing furniture manufacturing clusters equipped with shared resources like advanced machinery, testing labs, and training centers could enhance small and medium enterprises (SMEs).
  • Sustainability Grants: Financial support for adopting eco-friendly practices, such as using renewable energy and recycling materials, would position India as a global leader in sustainable furniture production.

 The furniture industry is hopeful for several key measures aimed at enhancing its growth and competitiveness. One major expectation is the granting of infrastructure status to the sector, which would facilitate easier access to financing and incentivize investments in production and logistics infrastructure. The industry is also anticipating tax reforms and incentives, particularly the reduction of import duties on essential materials or tax deductions aimed at improving manufacturing and logistics processes, which would help reduce operational costs.

Additionally, the sector is eager for increased investments in skill development programs and support for technology adoption, especially in supply chain management, to drive higher productivity and efficiency. There is also a push for GST rationalization, with the hope that simplification or reduction of GST rates on furniture will make products more affordable, boosting both domestic consumption and export potential.

Another focus is the support for small and medium enterprises (SMEs), which form a significant part of the industry. Measures such as easier access to finance or subsidies could help formalize operations, improve supply chain management practices, and increase overall sector efficiency. Collectively, these expectations highlight the industry’s need for policy support that addresses critical supply chain management challenges, fostering enhanced competitiveness in both domestic and international markets.

Expectations from Union Budget 2025 for the Polymer Industry
The polymer industry has high expectations from the Union Budget 2025 to address critical challenges and propel the sector toward sustainable growth. One of the key demands is the introduction of Production Linked Incentives (PLI) or tax benefits for adopting green technologies, encouraging manufacturers to shift toward environmentally friendly production practices. Reducing import duties on raw materials is another crucial ask, as it could stabilize costs, making Indian products more competitive both domestically and globally. Additionally, the industry seeks increased funding for research and development (R&D) to foster innovation, enabling the development of new polymer types and advanced applications.

Investments in infrastructure development, particularly in energy, are also vital to mitigate manufacturing disruptions caused by power shortages. Furthermore, initiatives aimed at skill development are necessary to equip the workforce with advanced manufacturing techniques and sustainable practices, addressing the industry’s labor challenges. Lastly, the industry looks forward to policy measures to improve ease of doing business, such as simplifying regulatory compliance and revising GST frameworks, to reduce operational burdens and encourage investment. These budgetary interventions, if implemented, could create a robust foundation for the polymer industry’s long-term growth and global competitiveness.

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