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Indian Chemicals Industry Analysis

June, 2017

In the Indian chemical industry, alkali chemicals have the largest share with ~69% in the total production; production of polymers accounts for ~59% of the total production of basic key petrochemicals in 2019.

The chemicals industry in India covers more than 80,000 commercial products with overall market size standing at US$ 178 billion in 2018-19. The industry is expected to grow at 9.3% to reach US$ 304 billion by 2025 on the back of rising demands in the end-user segments for specialty chemicals and petrochemicals. In September 2020, the production of key chemicals was 8,36,435 MT and petrochemicals was 17,26,502 MT.

Insecticides share 53% of the total domestic agrochemicals market, followed by Herbicides. Agrochemicals are the key revenue component of India, which exports 50% of its total production. Petrochemicals consumption stood at 22 million tonnes in 2019-20, out of which 16.5 million tonnes was polymer products.

Despite decreasing demand for polymers due to COVID-19 pandemic, India is likely to witness growth to ~32 million tonnes from 2020 to 2030.

India is a global supplier of dye, accounting for ~16% of the global production of dyestuffs and dye intermediaries. India has strong presence in the exports market in the subsegment of dyes, pharmaceuticals and agrochemicals. The country exports dyes to Germany, the UK, the US, Switzerland, Spain, Turkey, Singapore and Japan.

In October 2020, exports of organic chemicals and inorganic chemicals increased by 2% on a y-o-y basis to reach US$ 1,812.22 million. For petrochemicals, imports of petroleum and crude products decreased by 39% on a y-o-y basis to reach US$ 3,44.1 million in October 2020.

Supply disruption in China has caused the global end-user industries to diversify their vendor base mainly towards Indian players. Closure of plants in the EU and China due to increasing environmental concerns have favoured Indian manufacturers to invest further in specialty chemicals.

In the chemical sector, industrial licensing and 100% FDI, under the automatic route, are allowed with exception to few hazardous chemicals. Total FDI inflow in the chemicals (other than fertilisers) sector reached US$ 17.77 billion between April 2000 and June 2020.

The Indian Government supports the Industry through research & development and initiatives such as reducing basic customs duty on several imported products and promoting the ‘Make in India’ campaign.

A 2034 vision for the chemicals and petrochemicals sector has been set up by the government to explore opportunities to improve domestic production, reduce imports and attract investments in the sector. The government plans to implement production-link incentive system with 10-20% output incentives for the agrochemical sector; to create an end-to-end manufacturing ecosystem through the growth of clusters.

Lower per capita consumption and ease of doing business are promoted by the Indian government; this reflects good investment opportunities with huge growth potential.

The government has established four petroleum, chemicals and petrochemical investment regions (PCPIRs) as investment regions for petroleum, chemicals and petrochemicals, along with associated services. Plastics Parks have been set up to facilitate technology development and conducive ecosystem to produce specialised plastic products.

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