An overview on the Indian Chemicals Industry

The chemical industry is crucial for the economic development of any nation, providing products, and allowing technical solutions in virtually all segments of the economy. India is the sixth-largest producer of chemicals globally, and the third-largest producer in Asia in terms of output as the chemicals sector holds a significant position in the Indian economy, accounting for 7% of the GDP and about 14% in the overall index of industrial production (IIP). Chemicals industry in India is diversified, covering more than 80,000 commercial products.

The Indian Agro-Chemicals market is worth 2.5 Billion USD holding second place globally, accounting for 7.7% of global agricultural output. India is the third-largest consumer of polymer and the fourth-largest producer of agrochemicals in the world. There is a massive opportunity for the Indian market to grow fast due to a large population and a strong export demand. Moreover, the per capita consumption of chemicals is lower in India compared to western countries, therefore presenting immense scope for new investments.

For instance, Reliance Industries Ltd (RIL) is pursuing the deal with Saudi Aramco under which the Saudi Arabia energy giant is likely to pick up a 20 percent stake in RIL's oil-to-chemicals business for 15 Billion USD based on an enterprise valuation of 75 Billion USD. This lead several foreign investors like Mitsubishi Chemicals Corporation (Japan), Akzo Nobel (Netherlands), DuPont (USA), Syngenta (Switzerland), Croda (UK), DyStar (Germany) and Henkel (Germany) to enter Indian chemical industries. However, inadequate infrastructure facilities, power shortage, and reduced availability of quality catalysts are likely to act as restraints for the Indian chemical market.

Source: Directorate General of Commercial Intelligence and Statistics

India accounts for approximately 16% of the world dyestuff and dye intermediates production, making it a reliable dye supplier globally constituting near about 5.4% of India's total exports. For instance, The Department of Chemicals and Petrochemicals (GoI) announced that the entire commodity for chemicals stood at USD 19.09 billion during the year 2018-19 which dominated mainly by MSMEs, contributes nearly 10.5% to India's foreign trade and is an employment generator for millions generating an annual growth rate of about 8-10%. The sector is estimated to double its size to USD 300 billion by 2025. To attain this, the Government is pursuing a draft chemical policy that will focus on meeting the rising demand for chemicals and reduce imports.

Future Prospects:

• Indian chemical industry is likely to register a growth of 8-9% in the next decade and double its share in the worldwide chemical industry by 5-6% till 2021. Chemicals are USD 36 billion industry already, and in the next six to seven years, it is expected to become a USD 100 billion opportunity.
• FDI of 100% is allowed in India's chemical sector under the automatic route, except for a few of the hazardous chemicals.
• The US, the UK, the UAE, Bangladesh, and Saudi Arabia are the leading importers of cosmetics, toiletries, and essential oils, leading to economic growth.
• Growing chemical industries can employ millions. For instance, as per Make in India, this sector has generated employment for more than 5 million people.
• Proposal to establish an autonomous USD 100 Million chemical innovation fund securing 10% of the total inclusive, set up by the National Innovation Council to encourage commercialization efforts for innovations generating inclusive growth.
• Companies can step in upcoming PCPIRs in India and overcome challenges related to infrastructure, power, and water availability.
• The most significant learning for the world in this coronavirus crisis is that it is not good to concentrate all manufacturing in one country or one manufacturing location hence providing developing nations a wholesome opportunity.
• Companies need to invest in the right product mix to become profitable and competitive using the accessible feedstock in India i.e., Naphtha and its derivatives.
• Indian companies may survey possible Merger, JV opportunities for technology, capital, or access to the international market by taking advantage of the increasing expansion of western companies in India.
• There are better opportunities in segments such as Speciality Chemicals, Speciality Polymers, catering to huge emerging domestic demand and a manufacturing hub.

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