• India’s chemicals industry is a core driver of economic growth, contributing 7 per cent to the country’s GDP. 

• Today, India is the world’s sixth and Asia’s third-largest producer of chemicals. China, the United States and Germany are the top producers.

• With over 80,000 commercial products, the industry fuels multiple sectors such as agriculture, pharmaceuticals, textiles and automotives. 

• In a report titled ‘Chemical Industry: Powering India’s Participation in Global Value Chains’, NITI Aayog said India is aiming for $1 trillion chemical output by 2040.

• As of 2023, the Indian chemicals market consumption stood at around $220 billion.

• India’s share in the chemicals global value chain (GVC) is expected to reach $400 to $450 billion by 2030, with an estimated compound annual growth rate (CAGR) of 10 to 11 per cent.

• In the process the industry could create seven lakh to one million new jobs by the end of this decade.

• However, despite its robust growth trajectory, India’s participation in global chemicals value chains (GVCs) remains limited, with its share in global chemicals consumption standing at 3 to 3.5 percent in 2023. 

• India’s chemicals industry faces several structural constraints that hinder its ability to scale and integrate into GVCs. 

• Therefore, government intervention is necessary for enabling the sector to achieve its full potential.

Current consumption and trade balance

Petrochemicals, specialty and inorganic chemicals are the three key categories in India’s chemicals industry by market consumption size.

1) Petrochemicals: These chemicals are derived from petroleum and natural gas through a refinement process and are also known as petroleum distillates. The segment includes polymers, synthetic fibers, performance plastics and others. The category is further divided into building blocks (ethylene, propylene, benzene, butadiene, etc), intermediates — terephthalic acid (PTA), styrene, vinyl chloride monomer (VCM), phenol, etc — and end-products like high density polyethylene (HDPE), linear low density polyethylene (LLDPE), polyvinyl chloride (PVC), among others. Petrochemicals form the biggest chemicals segment, with consumption of $65 to $75 billion. The production-consumption gap in these has remained negative over the years.

2) Specialty chemicals: Chemicals with high value but low production volume are considered specialty chemicals, such as paints and coating, dyes, agrochemicals, surfactants, textile chemicals, to name a few. They facilitate function-specific products tailored for industries like pharmaceuticals, agriculture, and personal care, driving innovation and customisation. Specialty chemicals are a highly research and development-intensive category, accounting for over 50 per cent of the total chemical exports from India. This category constitutes around $40 to $45 billion of market consumption.

3) Inorganic chemicals: Fundamental to India’s industrial base, these chemicals provide essential materials for applications in construction, water treatment and electronics, among other sectors. Inorganic chemicals are a broad category of compounds that do not contain carbon-hydrogen bonds but encompass a variety of substances such as metals, salts and minerals. These chemicals find application in numerous industries, including agriculture (ammonia in fertilizers), manufacturing (hydrogen peroxide for surface treatment of metals), food processing (sodium hydroxide) and many more. The market for these chemicals is driven by their diverse applications and the availability of raw materials. Inorganics make up $15 to $20 billion of the total market consumption.

Import and export of chemicals

• In 2023, India imported chemicals worth $75 billion compared to exports worth $44 billion, accounting for a trade deficit of around $31 billion. 

• Back in the year 2000, India had a net zero trade balance. Rising imports of plastics, inorganics and chemicals have since caused a growing deficit over time. 

• Heavy domestic reliance on petrochemicals, too, contributes substantially to the trade imbalance. 

• India imports its highest volume of chemicals from China (30-35 percent).

• The United States, South Korea, Japan, Saudi Arabia, Germany, UAE, Kuwait and Italy are other significant import partners for chemicals in India.

• China is also an export partner for chemicals, accounting for 5 per cent of India’s total export value. The other significant export partners include the United States, Brazil, UAE, Germany, Netherlands, Saudi Arabia, Belgium and Japan.

Recommended interventions

• The Indian chemicals industry has the capacity to be a transformative force in the country’s journey towards economic self-reliance, job creation, and global leadership in manufacturing.

• By aligning efforts across stakeholders and tackling systemic inefficiencies, India can not only scale its global presence but also create a resilient and competitive chemicals ecosystem.

• NITI Aayog’s roadmap has seven policy interventions, which provides a comprehensive pathway to overcome current constraints and unlock the industry’s latent potential. 

They are:

1) Establish world-class chemicals hubs in India.

2) Develop existing port infrastructure for storage and handling of chemicals.

3) Introduce an operating expense (opex) subsidy for chemicals with high import dependence, export potential, and end-market criticality.

4) Develop and access technologies to enhance self-sufficiency and foster innovation.

5) Fast-track environmental clearance with transparency and accountability.

6) Securing free-trade agreements (FTAs) to support Industry growth.

7) Talent and skill upgradation in the chemical industry.

Manorama Yearbook app is now available on Google Play Store and iOS App Store