India’s chemical industry was
estimated to be worth USD 178 billion in FY20 and has a significant potential
to reach USD 300 billion by FY25. In terms of demand, the industry has grown at
approximately 1.3 times the country’s average GDP growth in the last five years
and shows a strong linkage with its GDP.
In order to achieve its target of
USD 300 billion by FY25, the chemical industry needs to grow at a CAGR of 11%
in the next five years, which is possible considering Government initiatives
and the growth in the consumer base, changes in lifestyle, increase in
disposable incomes and focus on healthcare and hygiene.
India ranks sixth in imports and
ninth in exports of global chemicals and chemical products (excluding
pharmaceutical products). Its imports increased at a CAGR of 5.4% between FY16
and FY2025 with petrochemical intermediates accounting for a major share of
over 30% in total imports. On the other hand, export of chemicals and chemical
products grew at a CAGR of 7.2% between FY16 and FY20. Specialty chemicals
account for a major share of more than 50% of chemical exports, dominated by
agrochemicals, dyes and pigments, etc.
The specialty chemicals segment
has grown at an impressive rate of approximately 11.7% in terms of value in the
last five years.26 The COVID-19 pandemic had a positive impact on the demand
for flavours and fragrances, personal care chemicals, nutraceutical ingredients
and surfactants as a result of increased consumption of hygiene products,
packaged foods, energy drinks and nutraceuticals.
The segment has immense growth
potential due to the increasing demand from construction, automotive,
packaging, water treatment, home and personal care, food processing,
nutraceuticals and other demand-driven sectors.
The Government has taken
progressive steps, such as the economic stimulus package, Production Linked
Incentive (PLI) Scheme, tax and labour reforms, setting up of the National
Infrastructure Pipeline (NIP) and various chemical industry specific policies
and schemes, including its public procurement policy, mandatory BIS standards,
skill development programmes and renewal of the PCPIR policy. The Indian chemical
industry has tremendous potential and a positive outlook, and is set to achieve
the USD 300 billion mark by FY25 and emerge as a global manufacturing hub.
The majority of Indian
petrochemical companies has evolved from petroleum refineries with the
intention of achieving higher net realisation. Therefore, the chemical industry
is dominated by basic commodity chemicals in terms of volume.
India’s petrochemical sector is
expected to witness a significant investment boom, with a number of multibillion-dollar
capital investments either already being implemented or expected within the
next few years. Both refiners and domestic petrochemical players are expanding
their petrochemical capacities.