The overall demand for paper, growing annually at 6.7 per cent, is expected to touch 20.8 million tonne in the country in fiscal year 2020-21, driven by rising income levels, growing per capita expenditure and rapid urbanisation, a report said Tuesday.

The domestic demand, which stood at 17.1 million tonne in FY18, has seen a steady growth since FY08, when it stood at 9.3 million tonne, Care Ratings said in its report.

However, the rating agency expects the raw material (pulp and recovered paper) prices to remain volatile due to volatility in international waste paper prices, healthy demand, forex fluctuations and restricted imports.

The printing and writing segment demand is expected to grow annually at 4.5 per cent and reach 5.8 million tonne in FY21, according to the report.

“The demand is expected to grow on account of improving literacy rates, growing enrolment and increasing number of schools and colleges,” the agency said.

It expects demand for packaging paper and board segment to grow at 8.9 per cent and reach 11.1 million tonne in FY21 following rise of e-commerce, requirement of better quality packaging of FMCG products marketed through organised retail, increasing demand for consumer durables and rising preference for packaged food.

Improving literacy rates, rising circulation and an increasing number of newspapers and magazines is likely to support the growth in newsprint demand which is expected to reach 2.7 million tonne in FY21, the report added.