Chemical Industry India India's Chemical Industry Still Largely Dependent on Imports

Editor: Dominik Stephan

The big growth rates of the pre–crisis boom years are a thing of the past: Although India's chemical industry is on the way back to moderate growths, the country still depends on the import of chemical goods in large scales. Its strong pharmaceutical industry, nevertheless, is about to take a leading role on the international generics market.

Despite moderate growth, the Indian chemical industry still is largely import dependent. (Picture: PROCESS/Source: Rockwell)
Despite moderate growth, the Indian chemical industry still is largely import dependent. (Picture: PROCESS/Source: Rockwell)

Despite grows within its industry, India remains a net importer of chemicals: In 2010, the country's commercial balance sheet for chemicals booked an excess of imports worth € 7 billion in total, a recent report of the German industrial association VCI (Verband der Chemischen Industrie) showed. Especially anorganics and polymers have shown a distinctively negative trade balance of Minus € 7.7 billion and Minus € 3 billion respectively. Industry experts see these import excesses as a result of the country's fast growing demand for basic feedstock and chemical products that the domestic production can't keep up with.

India is currently affected by slowing economical growth that affects the industrial sector in particular: Due to global economical insecurities, a domestic inflation and high prices for raw materials and comestible goods the recent economic data indicate a 5 percent growth for the last quarter of 2011 – not much compared with the solid two digit growth rates of the boom years.


Shrinking Processes Stopped, Yet Growth Rates Remain Small

The chemical industry seems to have overcome a painful shrinking process in the wake of the global economy crisis, but the record growths of the past remain unachieved: Growing by moderate 2 percent average per year since 2009, the chemical branch is especially affected by production cuts of its industrial customers like the automotive or construction industry.

Despite these backlashes, India's chemical market with a turnover volume € 76 billion is the eighth largest in the world and surpasses both the UK and Italy, profiting especially from its position among Asia's emerging economies.

Pharmaceutical Industry Profits From Boom In Generics

India's pharmaceutical industry has transformed to one of the largest and most efficient globally– Responsible for this development are especially the large Indian producers of generic drugs like Ranbaxy, Dr. Reddy's Laboratories, Piramal, Cipla or Wockhardt, that account for 20 percent of the global generics market.

Basic Chemicals Big in India, Report Shows

Basic chemicals like anorganics, petrochemicals and polymers accounted for around 45 percent of the Indian chemicals market. The governments 'National Policy on Petrochemicals' is specifically aimed at boosting investments in petrochemical facilities in the country, since products like plastics and polymers are needed to serve the growing demands of the Indian industry.

By restructuring the former mostly state owned fertilizer production, India has become the world's second biggest producers of fertilisers after the US. Companies in this sector of the economy especially profit from subsidiaries for basic feedstock such as natural gas.

Country Major Producer of Pest Control and Fertilisers

India is also a strong exporter of goods like pest control or hydrocarbons, accounting for 13% of the global insecticides market as well as 13% of the hydrocarbons derivatives production and alcohol derivatives (12%), says a report of the Export–Import Bank of India.

How Established Players Can Profit From an Emerging Chemical Industry

Not only Indian companies, but also the established players of the chemical industry are expected to profit from this development: Germany, the world's largest exporter of chemicals, for example exports chemical products wort € 1.4 billion into the country – with tendency to rise. Engineering firms and manufacturers profit from direct investments: In the past India was mainly used as a manufacturing site to produce cheap bulk materials for a local market – now companies hope to profit from the country's transformation to a global industrial hub.