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Indian Chemicals and Electronics Industry Analysis

December, 2016

The chemical industry in India is a key constituent of Indian economy, accounting for about 2.11 per cent of the gross domestic product (GDP). In terms of volume of production, Indian chemical industry is the third largest producer in Asia and sixth largest in the world. 

Indian chemical industry generated business worth US$ 118 billion in 2014. Bulk chemicals account for 39 per cent of the Indian chemical industry, followed by agrochemicals (20.3 per cent) and specialty chemicals (19.5 per cent). Pharmaceuticals and biotechnology accounted for the remaining share. 

India’s growing per capita consumption and demand for agriculture-related chemicals offers huge scope of growth for the sector in the future. Lured by the size and returns of the Indian market, foreign firms have strengthened their presence in India. From April 2000 to May 2015, total foreign direct investment (FDI) inflows into the Indian chemicals industry (excluding fertilisers) were US$ 10.49 billion.

The Government of India has been supportive to the sector. 100 per cent FDI is permissible in the Indian chemicals sector while manufacturing of most chemical products is de-licensed. The government has also been encouraging Research and Development (R&D) in the sector. Moreover, the government is continuously reducing the list of reserved chemical items for production in the small-scale sector, thereby facilitating greater investment in technology up-gradation and modernisation. 

The Government has launched the Draft National Chemical Policy, which aims to increase chemical sector’s share in country’s GDP. 

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