India’s thriving chemical industry owes its success to escalating demand and supportive government policies. India’s chemical sector is ranked the sixth-largest globally by output and third in Asia. Contributing a substantial seven percent to India’s GDP, the chemical industry is a key supplier to diverse industries like textiles, pharmaceuticals, and agrochemicals. Government initiatives, including chemical development schemes, and plastic parks, are fueling investment opportunities. Notably, the chemical industry allows 100 percent FDI through the automatic route, except for select hazardous chemicals.
India’s chemical industry is thriving due to rising demand and favorable government policies. India boasts an impressive position as the sixth-largest chemical producer globally and ranks third in the Asian region. Methylene Chloride Flammable
The chemical industry plays a crucial role in India’s economy, contributing a significant 7 percent to its GDP. It provides several building blocks and raw materials for various industries, including textiles, paper, paints, soap and detergents, pharmaceuticals, and agrochemicals.
To encourage investments, the government has launched various policies, such as the chemical promotion and development scheme, Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs), and plastic parks.
Furthermore, the Government of India is considering launching a production-linked incentive (PLI) scheme for the chemical and petrochemical industry to boost domestic manufacturing and exports. This scheme is designed to provide companies with incentives based on the increase in sales from products manufactured within the country.
In the Union Budget 2023-24, the central government allocated US$20.93 million to the Department of Chemicals and Petrochemicals. This allocation underscores the government’s commitment to support and further develop the chemical sector.
The Indian chemical industry is expected to reach US$304 billion by 2025, registering a compound annual growth rate (CAGR) of 9.3 percent.
The chemical industry in India is valued at a substantial US$220 billion and experts predict that it could reach an astonishing US$1 trillion by 2040.
By 2025, the demand for chemicals in India is expected to grow by 9 percent per annum, and the chemical industry is anticipated to contribute US$383 billion to India’s GDP by 2030. This increase is expected due to the rise in demand in the end-user segments for specialty chemicals and petrochemicals segment.
According to Invest India, the market size of the chemical and petrochemical sector in India is US$178 billion.
The Indian chemical industry covers around 80,000 commercial products, employees over two million people, and makes up 3.4 percent of the global chemical industry.
India holds a strong position in international trading of chemicals and ranks ninth in exports and sixth in imports at a global level (excluding pharmaceuticals). India accounts for 2.5 percent of the world’s global chemical sales and exports to more than 175 countries worldwide. The major export destinations are the United States, China, and new destinations—Turkey, Russia, and Northeast Asia (China, Hongkong, Japan, Korea RP, Taiwan, Macao, and Mongolia).
From April 2022- March 2023, exports of organic chemicals (US$9.64 billion) and inorganic chemicals (US$2.17 billion) were estimated at US$17.19 billion. India’s chemical industry holds significant appeal to investors owing to growing demand, which is attracting investment accompanied with policy support by the government. A network of 200 national laboratories and 1,300 R&D centers provides a strong base to the Indian chemical industry to drive innovations.
Growth Drivers of Chemical Industry in India
India is making significant strides in this sector, with an estimated investment of INR 8 trillion (equivalent to US$107.38 billion) expected by 2025 in chemicals and petrochemicals. The demand for petrochemicals in India is set to grow at a 7.5 percent rate between 2019 and 2023, and the demand for polymers is expected to grow even faster at eight percent.
Notably, India ranks as the third-largest consumer of polymers globally and is projected to consume around 60 million tons of polymers by the year 2040. This indicates a promising and robust future for the chemical, petrochemical, and polymer industries in India and worldwide.
Between 2023 and 2028, the India fertilizer market is expected to grow at a CAGR of 4.7 percent, reaching a projected value of US$1160.18 billion. In 2021, the fertilizer market in India reached a value of US$ 841.2 billion.
Increased demand for food production and improvements in agricultural processes are driving market growth.
The fertilizer market is based on product type, segment, formulation, application and region.
Snapshot of Fertilizer Market in India
Within the fertilizer market, two primary types stand out: chemical fertilizer and biofertilizer. Notably, chemical fertilizers hold a significant portion of the market share, establishing their dominance.
Further segmentation is observed based on specific categories, including complex fertilizers, DAP, MOP, urea, and SSP. Presently, DAP emerges as the most prominent type, commanding a substantial portion of the market share.
A categorization based on formulation distinguishes between liquid and dry fertilizers. The lion’s share of the market belongs to the dry fertilizer segment, representing the forefront of this division.
Similarly, based on application, the market is classified into farming and gardening segments. At present, farming applications assert their supremacy, capturing the larger portion of market demand.
Geographical segmentation divides the market into four regions: North India, South India, East India, and West India. Within the Indian fertilizer market landscape, it’s worth noting that North India takes the lead as the market frontrunner.
Specialty chemicals are distinctive compounds formulated to fulfil specific purposes, encompassing applications like pharmaceutical production, enhancement of cosmetic products, and optimization of industrial processes. The creation of these chemicals often involves advanced research and development efforts to cater to their specialized functions. Their significance is paramount across various industries, offering distinct attributes that conventional chemicals struggle to replicate.
As per industry reports, the specialty chemicals sector in India accounts for 22 percent of the chemicals and petrochemicals market, with projections indicating a potential doubling of its market share by 2027. Industry players are proactively pursuing strategies such as import substitution and venturing into exports to expedite their business expansion.
Globally, specialty chemicals contribute to 20 percent of the colossal US$4 trillion chemical industry. India’s specialty chemicals market is poised to experience a remarkable growth trajectory, with an anticipated CAGR of 12 percent, propelling it to a valuation of US$64 billion by 2025. This surge will be powered by robust demand, expected to achieve a CAGR ranging between 10 to 20 percent, within export and end-user sectors.
The upswing in demand from end-user domains like food processing, personal care, and home care is steering the diversification and progression of various segments within India’s specialty chemicals market.
According to Expert Market Research (EMR), India’s agrochemicals market is projected to grow rapidly at an 8.6 percent CAGR between 2021 and 2026, reaching US$7.4 billion. Around 50 percent of agrochemicals are exported globally from India. The country ranks as the fourth-largest agrochemical producer, trailing behind the US, Japan, and China. Additionally, India is the thirteenth-largest exporter of pesticides and disinfectants. The growth in agrochemical demand is mainly driven by the agricultural sector. The market’s expected expansion is supported by factors such as low-cost manufacturing, technically trained manpower, seasonal domestic demand, competitive pricing, overcapacity, and a strong presence in generic pesticide manufacturing.
Key Players in Chemical Sector
Adhesives, sealants, waterproofing solutions, construction chemicals, industrial resins, and polymers
Gypsum, soda ash, soda bicarbonate, cement, salt, marine chemicals and crushed refined soda.
Crop protection, herbicide, fungicide, insecticide, water conservation, seed treatments, adjuvants, biosolutions and fumigants
Caustic soda, special chlorine derivatives, sodium chlorate, caustic potash, chloromethane, phosphoric acid, hydrogen peroxide and water treatment solutions.
Polymers, elastomers, polyesters, aromatics, fiber-intermediates and advanced materials
Fungicide, herbicide, insecticide, industrial gases, alcohols and aldehydes, glycol ethers, glycol ether acetates and esters.
E.I. Du Pont India Private Limited
Adhesives, digital printing inks and packaging materials and solutions.
Mitsubishi Chemical India Private Limited
Industrial chemicals, basic petrochemicals, solvents and methyl methacrylate monomer
& derivatives acrylonitrile and related products
Aromatics, chlor-alkali, ethanolamines, ethoxylated surfactants, glycols, linear alpha olefins, natural detergent alcohol and olefins.
Exxonmobil Company India Private Limited
Butyl, ethylene propylene diene (EPDM) rubber, polyethylene products, polymer modifiers, polyolefin plastomers and elastomers and polypropylene
100 percent FDI is allowed in the chemical sector under the automatic route, with the exception of a few hazardous chemicals. Industrial licensing is approved in most sectors, except for certain hazardous chemicals like acetone, acrylonitrile, aldrin, and alkyl phthalate among others which are capable of causing major accident hazards.
FDI in India’s Chemical Industry (April 2000-March 2023)
The Indian Government actively supports the chemical industry, prioritizing growth in R&D capacity, manufacturing under the Make in India or Atmanirbhar Abhiyan initiatives, and reductions in the basic customs duty on several products.
We list some of the industry-focused policy efforts below.
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