NR TRENDS
India’s increasing preference to
synthetic rubber
– Underlying factors and future Trends
Introduction
I ndia occupies a unique status among major
rubber-consuming countries by consuming
more quantity of natural rubber (NR) than
synthetic rubber (SR)1. However, the past few
years have witnessed the consumption of SR in
the country growing at a much faster rate than that
of NR. Against a 3.5 per cent average annual rate
of growth in consumption of NR, the consumption
of SR increased at 13.3 per cent average annual
1
In the total quantity of natural and synthetic rubber
consumed during 2011, the relative share of natural
rubber was 43.6 per cent in China, 35.5 per cent in the
USA and 43.9 per cent in Japan. But, India’s relative
NR-share during the year was 69.3 per cent
Jom Jacob
Deputy Director (Statistics & Planning)
rate during the three-year
period from 2009-10 to 2011-
12. This is expected to have
resulted in a marked shift in
the relative proportion of NR
and SR in the country’s total
consumption of the two types Jom Jacob
of elastomers. This article attempts to analyse
the relative proportion of NR and SR in the total
consumption with reference to the 15-year period
from 1997-98 to 2011-12 and forecasts the future
trends by identifying the key determinants.
Trends in relative NR-share
Analysts by and large until a few years ago were
advocating the view that the country’s relative
RB BULLETIN l VOL.31 l No.1 l 2013 13
NR TRENDS
more pronounced in the
recent years. During the
three-year period from
2009-10 to 2011-12, SR
grew at 13.3 per cent
average annual rate as
against 3.5 per cent rate
registered by NR.
The proportion of
NR and SR used in
the manufacturing of
a product is largely
decided on technical
considerations rather
than relative prices.
Fig 1. Relative share of NR in total consumption of rubber (%) For a given product,
the flexibility available
NR-share would go up on potential penetration of for substitution between NR and SR is very
radial tyre in the truck, bus and LCV segments. much limited because technical consideration
This argument was further supported by the and desired performance of the product often
view that NR would get preference over SR on override the economic advantage of substitution2.
economic consideration besides taking potential It merits mention that the relative NR share has
benefits from NR’s green credentials. But, the last progressively declined in India in the past 15 years
three-year period has seen the relative share of NR despite the fact that NR stayed less expensive
losing 3.3 percentage points from 72.8 per cent than SR throughout the period with very few
in 2009-10 to 69.5 per cent in 2011-12. Tracing exceptions. Therefore, the fall in the relative share
back further, the 15-year period from 1997-98 to
of NR in India cannot be attributed to substitution
2011-12 has witnessed a fall by 8.5 percentage
from NR to SR.
points in the relative share of NR, from 78.0 per
The relative proportion of NR and SR in the total
cent to 69.5 per cent (Fig 1).
quantity of rubber consumed in a country largely
Underlying factors depends on the composition of end-products
The shrinking NR share implies that the manufactured. For instance, the relative proportion
consumption of NR is growing more slowly of NR will be high if the country produces more
compared to SR. The 15-year period ended 2011-12 NR-rich products such as truck and bus tyres. On
has witnessed a much faster rate of increase in the the other way, the relative NR-share will be low
consumption of SR as compared to NR. Against a
3.8 per cent average annual rate of increase in the 2
For instance, in spite of a much lower price for NR
consumption of NR, the consumption of SR grew during 2000 (as compared to SR), substitution in favour
at 7.3 per cent. The faster growth of SR has been of NR had been marginal.

14 RB BULLETIN l VOL.31 l No.1 l 2013

 NR TRENDS
Table 1. Production of tyres of passenger car, truck & bus and LCV

Period Production of Production of Production Total produc- Proportion of

truck & bus tion of the passenger car
passenger car of
three catego- tyre in the total
tyre tyre LCV tyre ries of tyre (%)
(‘000 no.) (‘000 no.) (‘000 no.) (‘000 no.)

1997-98 4,263 8,095 1,903 14,261 29.9

1998-99 4,571 7,913 1,917 14,401 31.7
1999-00 6,054 8,969 1,980 17,003 35.6
2000-01 6,813 8,612 2,108 17,533 38.9
2001-02 7,481 8,474 2,352 18,307 40.9
2002-03 8,544 9,863 2,844 21,251 40.2
2003-04 9,959 10,821 3,271 24,051 41.4
2004-05 11,862 11,092 3,945 26,899 44.1
2005-06 13,605 11,941 4,529 30,075 45.2
2006-07 14,263 12,367 4,820 31,450 45.4
2007-08 16,437 13,137 5,320 34,894 47.1
2008-09 16,570 12,839 5,298 34,707 47.7
2009-10 20,047 14,811 5,739 40,597 49.4
2010-11 26,201 15,668 6,029 47,898 54.7
2011-12 27,141 16,085 6,688 49,914 54.4

Source: www.atmaindia.org

if SR-rich products such as passenger car tyres
dominate in the end-products3.
Auto-tyre manufacturing industry enjoys a near
total dominance in the consumption of rubber in
India. Nearly 65 per ent of the NR and 73 percent
of SR consumed in the country during 2011-12
was contributed by the auto-tyre manufacturing
industry. Therefore the investigation into the
causes of the falling NR-share in the country’s
rubber consumption invariably has to examine
the composition of auto-tyres manufactured in the
3
NR constitutes 82 to 86 per cent of the total rubber
used in a truck and bus tyre. But, in a passenger car
tyre, NR constitutes only 25 to 40 per cent of the total
rubber used.
country. Table 1 gives the trends in production of
passenger car tyre, truck and bus tyre and LCV
tyre during the period from 1997-98 to 2011-12.
The table reveals a marked shift in the composition
of auto-tyre production in favour of passenger
car tyre. The proportion of passenger car tyre in
the total production of tyres for passenger car,
truck and bus and LCV has increased by nearly
25 percentage points from 29.9% in 1997-98
to 54.4% in 2011-12. Obviously the auto-tyre
manufacturing sector is undergoing a marked shift
in favour of passenger car tyre which absorbs NR
in a much lower proportion as compared to SR.
To be more specific, the changing composition of
auto-tyre production explains the falling relative
share of NR in India.

RB BULLETIN l VOL.31 l No.1 l 2013 15

NR TRENDS
expected in the relative
Relative
NR share. Statistical
NR sha
(Actual re
and pro
jected) analysis based on 15
annual observations
from 1997-98 to 2011-
12 revealed that the
relative NR-share
and the proportion of
passenger car tyre in the
country are correlated
in the form of the
Relative NR-share is projected to fall from 69.5% in 2011 to following estimated
64.5% in 2020-21 regression equation5:
Relative NR-share =
-0.385181 X (proportion
of passenger car tyre)
Fig 1. Relative share of NR in total consumption of rubber (%) + 92.56387.
Forecasts of the relative
Future trends in NR-share NR share have been prepared for the period up
The observed fall by 8.5 percentage points in the to 2020-21 by using the estimated regression
relative NR-share in the 15-year period ended equation. Fig 2 shows the forecasts of the relative
2011-12 is estimated to have shaved out 118,000 NR share along with the projected values of the
tonnes from the country’s NR-demand every year4. proportion of passenger car tyres for the period
Therefore, future trend in the relative NR-share upto 2020-21.
will have important implications for the country’s
The results suggest that the relative NR-share in
demand prospects for NR.
India would continue to fall by five percentage
Future developments in the composition of points from 69.5 per cent in 2011-12 to reach
auto-tyre production are key to the prospects of
64.5 per cent by 2020-21. At the current level of
country's trend in NR’s relative share. As stated
consumption, a five percentage fall in the relative
earlier, the proportion of passenger car tyre in total
NR-share is equivalent to NR further losing its
production of tyres for passenger car, truck & bus
domestic market size for SR by an estimated
and LCVs has increased from 29.9 per cent to 54.4
70,000 tonne every year.
per cent during the period from 1997-98 to 2011-
12. Exponential smoothing by using the ‘E-views’
software suggests that the proportion of passenger 4
India consumed 13.88 lakh tonne of rubber (NR and
car tyre would continue the trend to touch 72.9 SR) during 2011-12. Its 8.5% comes to 118,000 tonne.
per cent by 2020-21. This implies that SR-rich 5
The regression output gave the following values:
passenger car tyre will gain further dominance Adjusted R2 = 0.761811, t-ratio of the independent vari-
in the composition of auto-tyre production in able = -6.765863, F-ratio = 45.78, DW statistic = 1.46,
the country. Therefore, a further fall can be Observations: 15 annual figures for 1997 to 2011.

16 RB BULLETIN l VOL.31 l No.1 l 2013