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India: Market Overview Rise of the Indian Chemical Sector

Author: Ahlam Rais

India's chemical industry is one of the fastest growing in the world and contributes 3.4 % to the global chemical industry. A dedicated focus on developing sustainable specialty chemicals and investing significantly in R&D and technology is trending in this burgeoning sector.

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India ranks 14th in export and 8th in import of chemicals.
India ranks 14th in export and 8th in import of chemicals.
(Source: Deposit Photos)

The Indian chemical industry is expected to double its size to 300 billion dollars by 2025. This statement by the apex national body Indian Chemical Council (ICC) last year attracted eyeballs from across the globe. India is the sixth largest producer of chemicals in the world, contributes 3.4 % to the global chemical industry and employs more than two million people.

The chemical industry in India is a mix of small- and large-scale players (this also includes MNCs). The main demand drivers for this industry are agriculture, infrastructure, energy, water and waste management.

“As per industry analysis and reports, the Indian chemical industry may witness a dip of 6-15 % in demand due to Covid-19.” – Shohab Rais, Chief Operating Officer - Indian Chemical Business, Tata Chemicals
“As per industry analysis and reports, the Indian chemical industry may witness a dip of 6-15 % in demand due to Covid-19.” – Shohab Rais, Chief Operating Officer - Indian Chemical Business, Tata Chemicals
(Source: Tata Chemicals)

Shohab Rais, Chief Operating Officer — Indian Chemical Business at Tata Chemicals says, “The Indian advantage lies in the manufacturing of basic chemicals that are also known as commodity chemicals that accounts for about 57 % of the total domestic chemical sector.” Adding to this, Sudhir Shenoy, CEO and Country President, Dow Chemical International opines, “Overall, I see the sector increasingly moving from a commodity player to a value-based solutions provider. This upward integration will help both big as well as smaller players create avenues to foster higher collaboration across the value chain.”

What’s Trending in the Indian Chemical Industry?

“Recessionary fears due to socio-political uncertainty and disruption of global supply chains owing to Covid-19 will make 2020 a raucous year.” – Sudhir Shenoy, CEO and Country President, Dow Chemical International
“Recessionary fears due to socio-political uncertainty and disruption of global supply chains owing to Covid-19 will make 2020 a raucous year.” – Sudhir Shenoy, CEO and Country President, Dow Chemical International
(Source: Dow Chemical International)

The development of specialty chemicals with a dedicated focus on sustainability or eco-friendly solutions is certainly one of the most recent trends of the sector. Rais confirms, “The industry is focusing on specialty chemicals and development of new products whether it is related to alternate material for environmentally unfriendly products or performance improvement of downstream products.”

Rais further continues by saying that one of the emerging trends in the chemical industry is the increased use of technology. Innovation is changing the sector drastically as more companies are investing in R&D and technology for the betterment of services and product quality.

Another notable trend in the industry is shared by Shenoy, he states, “The shift in production and consumption towards Asian and Southeast Asian countries in all sectors is leading to an increase in demand for chemicals and petrochemicals.” Industry leaders are carefully analysing these trends and undertaking suitable measures for their respective growth ambitions.

Globally Competitive

India's chemical industry is one of the fastest growing in the world, according to a report by the Federation of Indian Chambers of Commerce & Industry (Ficci). To remain globally competitive and comply with the European regulation “Reach” (Registration, Evaluation, Authorisation and Restriction of Chemicals); there is a need for the chemical sector in India to upgrade its technology and enhance its performance at the global level. Currently, a significant portion of the industry comprises of small-scale companies which cannot afford costly upgrades to their plants whereas, in the case of medium- and large-scale companies, technologies are being brought from overseas.

R&D and innovation can also be considered as two key focus areas for the Indian chemical industry to be globally competitive. “The specialty and knowledge-intensive chemical sector requires R&D for product improvement as well as orchestrate process innovations for cost savings,” explains Rais. “India has the potential to play an important role in R&D and innovations. The average spend on R&D activities by Indian companies is roughly around 1 % of their revenues, whereas the global benchmark is about 5 %.”

The creation of dedicated chemical zones such as the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) by the Indian Government is expected to further boost the competitiveness of the sector. In addition to this, there is also a need for world-class infrastructure and policies related to clearances  — a real challenge for the chemical sektor.

Import-Export Scenario

India ranks 14th in export and 8 th in import of chemicals. To achieve its 300 billion dollar mark by 2025, the Indian chemical sector needs to strategise its next move. “The Indian Government is currently working on a Draft Chemical Policy that will focus on meeting the rising demand for chemicals and reduces import dependency and promotes export business,” exclaims Rais. The government has also restructured the import duty on some raw materials like ethane, propane, butane, reformate to 2.5 % from 5 %, which is likely to support the margins for the sector, according to a report by PBG Research.

Going Ahead …

The chemical sector in India is also facing numerous issues which need to be addressed by the government. “Managing permits and approvals from pollution and environmental assessment and impact agencies should be streamlined,” opines Shenoy. “The evaluation mechanisms should mirror approved global benchmarks based on holistic life-cycle assessments and environmental exposure studies.” He further adds that the country will have to address piracy and counterfeiting issues with utmost urgency as the industry needs an efficient, transparent and quick regime that allows innovators to have protection with agility.

The Indian chemical industry is speeding ahead and the creation of effective PCPIRs along with the many trends currently witnessed by the sector has the potential to further boost the industry and make it poised for growth!

* The author is an editor at PROCESS Worldwide. Contact: ahlam.rais@vogel.com

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