Blue Sky in China, Raining Money in India

Blue Sky in China, Raining Money in India

Pollution in China

Over time, regulating agencies in developing countries have become more stringent in ensuring a complete compliance with environmental norms. In China, restrictions have firmed up over the last 2 years.

In China, It is estimated that more than 80,000 factories1 have been shut down across the country by the anti-pollution drive. Other establishments caught infringing environmental regulations have been ordered to clean up their operations within a short time frame or risk closure by the inspection squad. This shows a huge opportunity for India to cater the various product to other parts of the world.

The sectors most severely impacted by the anti-pollution drive have been textiles, energy, heavy metals, coal and gas, mining, cement, paper, Speciality Chemicals, Pharmaceuticals, API, Fertilizers, automobile, and consumer goods. The impact is also expected to shock international supply chains due to disruption in exports from China.

China has enacted two new environmental protection laws at the start of 2018 — one to formalize the emissions discharge fee into a tax collected from industrial polluters, and the other to combat water pollution more effectively. These two will also increase the cost of production.2

China firms accused of violating environmental regulations paid fines totalling 1.02 billion yuan ($154 million) in the first 10 months of 2017, up 48 percent from a year earlier.

In India, compliances were stringent for five or six years, providing the country a competitive advantage, making it possible for Indian players with large capacities and international quality compliance and environmental standards to capture the opportunities.

India has recently been developed into the manufacturing hub for various products Textile, heavy metal (steel, aluminum) chemicals, fertilizers, cement etc. on account of superior compliance with environmental norms, increasing competitiveness and decline in Chinese competitiveness. Moreover, as MNC customers remain keen to reduce their country risk through widening diversification; India is well positioned to capitalize, translating into growth opportunities for the export of specialty chemicals and pharmaceutical intermediates.

We believe that actions taken in China are a good opportunity for Indian manufacturers to shift the demand permanently from China to India. Companies like Aarti Drugs, Aarti Industries, INEOS Styrolutions and Tata Chemicals etc. are on our buying list.

From January 1 next year, large chemical and energy firms could end up paying four times more than previously for causing pollution

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Raj Kumar

Research Assistant

Green Portfolio

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