An overview of the growing chemical industry in India

The Indian chemical industry has gained a major share in Asia’s growing contribution to the global chemical industry. It has also emerged as one of the preferred destinations for investment in the chemical industry worldwide (Chambers, Road, & Nadu, 2012). With the global share of 3 %, the Indian chemical industry covered a size of about $ 108 billion in 2012 and $ 290 billion in 2017 (Industry, Update, & Kapoor, 2018).

In terms of exports of chemicals, India ranks 17th in the world export of chemicals and ranks 7th in the world imports of chemicals. The chemical industry constitutes 5.4% of India’s total exports with the major share of sub-segments occupied by dyes, pharmaceuticals and agrochemicals. The leading export destinations for chemical products include Germany, U.K, Switzerland, Spain, Turkey, Singapore and Japan (Planning Commision, 2012). Furthermore, the import partners are China, Ukraine and Turkey. The Indian chemical industry has delivered high growth in the world market due to a varied manufacturing base that produces superior quality products. In addition to this, the expansion in the chemical market has attracted a large pool of highly trained and skilled scientific manpower.

India’s chemical industry in the global market

In terms of the sub-segments market distribution, dyes and agrochemicals have displayed a strong presence in the world market. In addition to this, exports of Pesticides have shown a strong CAGR of 17.5 % in terms of quantity and 13.4$ in terms of value during the period of 2013- 2017 (Industry et al., 2018). Furthermore, the Alkali and inorganic chemicals had also displayed a high growth both in terms of volume and value. In the past five years, dyes and pigments have been the major contributor for trade surplus, indicating a strong export performance of these sub-segments and strengthening its position in the global markets. The growth in these sub-segments can be attributed to the superior quality products and cost competitiveness.

The chemical industry in India has observed a high rate of growth of around 14% in the past 5 years with a majority of share occupied by petrochemicals which registered a growth of about 8-9% in the same period (Sethi, 2014). This growth is also supported by an increase in disposable income and increasing urbanization are boosting the end consumer demand for textiles, adhesives, construction and paints have generated significant growth opportunity for the chemical industry. Furthermore, India self-consumes about 33% of its chemical production output. Therefore, India has also emerged as one of the largest consumers of chemical products.

Government policies to strengthen the chemical industry

The policies of the government and high FDI inflows have supported the growth of the chemical industry. The government has built a fund for upgrading technology which amounts to $80 million (Industry et al., 2018). In addition to this, the government has approved the consolidation of multiple legislations governing chemical industry into integrated chemical legislation. Also, the government has simplified the procedures for FDI inflow through the automatic approval route for FDI to 100 % in the industry.  Furthermore, the government has granted tax and duty reductions. Import duty is granted on various input materials including coal, furnace oil, naphtha and so on. It is under the CENVAT credit to encourage companies to set up captive power plants.

Government policies support and promote integrated petroleum, chemicals and petrochemical regions that will be set up across 250 square kilometres for the manufacturing of domestic and export-oriented products. Furthermore, there are growth opportunities in segments such as speciality chemicals, polymers that generate huge domestic demand can make India highly competitive in the production of chemical products (Sethi, 2014).

The government is planning to consolidate multiple legislations that have been governed within the chemical industry under one chemical legislation. The legislation would cover the entire life cycle of the chemicals. The national innovation council has encouraged commercialized efforts to innovate the inclusive growth.  The future prospects show that the chemical industry can deliver an accelerated growth phase with a clearly defined vision.

References

  • Chambers, J. M., Road, J., & Nadu, T. (2012). Indian Chemical Industry, 1–20. Retrieved from http://psalegal.com/wp-content/uploads/2017/01/Indian_Chemical_Industry_Report_2011_vfinal.pdf.
  • Industry, C., Update, S., & Kapoor, R. (2018). Major Segment of Chemical Sector Key factors influencing the sector.
  • Planning Commision. (2012). Indian Chemical Industry: Five Year Plan-2012-2017, 1–107.
  • Sethi, J. (2014). Future Trends and challenges in Chemical Logistics in India, (October), 60–62.
Divya Narang

Divya Narang

Research analyst at Project Guru
Divya is a Masters in economics with a specialization in econometrics. She has worked on various research works in the field of economics and finance. Apart from this, she has developed keen interest in business management, business policy, international marketing and strategic management. Her methodological work focuses on analysis on panel data using statistical software like SPSS and STATA. She loves to spend her spare time reading novels and playing badminton.
Divya Narang

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