Chemical Industry

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.

Petrochemicals

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.