Advantage India
Growing
Demand
* Rise in demand from end-user industries such as food processing, personal care and home care is driving development of different segments in India’s specialty chemicals market.
* Exports of Chemicals and allied Products reached Rs. 9,28,119 crore (US$ 108.59 billion) during FY25.
* Chemicals and petrochemicals demand in India is expected to nearly triple and reach US$ 1 trillion by 2040.
* India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to India’s GDP.
Opportunities
* India’s specialty chemicals companies are expanding their capacities to cater to rising demand from domestic and overseas.
* With global companies seeking to de-risk their supply chains, which are dependent on China, the chemical sector in India has the opportunity for a significant growth.
* The Dahej PCPIR project in Bharuch, has attracted an investment of Rs. 1 lakh crore (~US$ 12 billion) and is expected to generate 32,000 jobs.
* The Indian chemical industry is currently valued at US$ 220 billion and is expected to reach US$ 300 billion by 2030 and US$ 1 trillion by 2040. This industry remains an active hub of opportunities, even in an environment of global uncertainty.
Policy
Support
* PLI schemes were introduced to promote Bulk Drug Parks, with a budget of Rs. 1,629 crore (US$ 213.81 million).
* Under the Union Budget 2025-26 the government allocated Rs. 1,61,965 crore (US$ 18.7 billion) to the Ministry of Chemicals and Fertilizers.
* The Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) set up at Paradip has attracted investments worth US$ 8.84 billion (Rs.73,518 crores) resulting in employment of about 40,000 people.
* Government to open 25,000 Jan Aushadhi Kendras to make medicines available at affordable prices.
Increasing
Investments
and spending
* FDI inflows in the chemicals sector (other than fertilizers) reached Rs. 1,42,647 crore (US$ 23.2 billion) in FY25.
* An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025.
* Prime Minister, Mr. Narendra Modi, laid the foundation stone of development projects worth more than Rs. 50,700 crore (US$ 6.11 billion) on September 14, 2023.
Introduction
Covering more than 80,000 commercial products, India’s chemical industry is extremely diversified and can be broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers. India is the 6th largest producer of chemicals in the world and 3rd in Asia, contributing 7% to India’s GDP. India's chemical sector, which was estimated to be worth around Rs. 21,50,750 crore (US$ 250 billion) in 2024, is anticipated to grow to US$ 300 billion by 2025 and Rs. 86,03,000 (US$ 1 trillion) by 2040. This industry remains an active hub of opportunities, even in an environment of global uncertainty.
Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan and China. India accounts for 16-18% of the world's production of dyestuffs and dye intermediates. Indian colourants industry has emerged as a key player with a global market share of ~15%. The country’s chemicals industry is de-licensed, except for a few hazardous chemicals. India has traditionally been a world leader in generics and biosimilars and a major Indian vaccine manufacturer, contributing more than 50% of the global vaccine supply. India holds a strong position in exports and imports of chemicals
at a global level and ranks 14th in exports and 8th in imports at the global level (excluding pharmaceuticals. From (April-February) FY25, India's dye exports (Dyes and Dye Intermediates) totalled Rs. Rs. 20,088 crore (US$ 2.3 billion).
Major chemical production reached 1,014 thousand metric tonnes in March 2025, while petrochemical production reached 1,877 thousand metric tonnes.
In March 2025, production levels of various chemicals were as follows:
- Soda Ash: 299.27 (‘000 MT)
- Caustic Soda: 320.43 (‘000 MT)
- Liquid Chlorine: 223.72 (‘000 MT)
- Formaldehyde: 31.03 (‘000 MT)
- Pesticides and Insecticides: 19.18 (‘000 MT)
India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, enables it to benefit on economies of scale.
Markets Size
India has traditionally been a world leader in generics and biosimilars and major Indian vaccine manufacturers, contributing more than 50% of the global vaccine supply. Chemicals and petrochemicals demand in India is expected to nearly triple and reach US$ 1 trillion by 2040.
An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals and petrochemicals sector by 2025. Specialty chemicals account for 20% of the global chemicals industry's US$ 4 trillion, with India's market expected to increase at a CAGR of 12% to US$ 64 billion by 2025. This gain would be driven by a healthy demand growth (CAGR of 10-20%) in the export/end-user industries.
The Department of Chemicals & Petrochemicals intends to bring PLI in the chemical & petrochemical sector and will redraft the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) guidelines.
A shift in the global supply chain brought on by the China+1 strategy and a resurgence in domestic end-user demand was expected to fuel significant revenue growth of 18–20% in 2022 and 14–15% in 2023.
Investments and Recent Developments
A few recent developments/investments in the Indian chemical sector are as follows:
- In FY25 exports of organic chemicals stood at Rs. 67,162 crore (US$ 7.8 billion) & inorganic stood at Rs. 19,426 crore (US$ 2.27 billion).
- Imports of organic chemicals were Rs. 1,28,470 crore (US$ 15.03 billion) and inorganic chemicals Rs. 51,034 crore (US$ 5.97 billion) from FY25 (April–February).
- In FY25 (April–February), Imports of castor oil, essential oil, and cosmetics and toiletries stood at Rs. 21,981 crore (US$ 2.57 billion).
- Export of castor oil, essential oil, and cosmetics and toiletries are Rs. 32,487 crore (US$ 3.8 billion) during FY25 (April-February).
- In FY25 (April–February), the export of agrochemicals was Rs. 32838 crore (US$ 3.8 billion), dyes were Rs. 18,778 crore (US$ 2.2 billion) and the other dye intermediates were Rs. 1,179 crore (US$ 138 million).
- The import of agrochemicals was Rs. 12,624 crore (US$ 1.48 billion), dyes were Rs. 2,526 crore (US$ 295.5 million) and the other dye intermediates were Rs. 10,498 crore (US$ 1.23 million) during FY25 (April–February).
- After three years of discussions, the UK and India have finalized a landmark Free Trade Agreement (FTA). The agreement removes tariffs on 99% of Indian exports and reduces duties on 90% of UK exports to India, with the chemical industry standing out as one of the major winners.
- In August 2023, the Prime Minister announced a subsidy of Rs. 10 lakh crore (US$ 120.93 billion) for providing cheaper Urea to farmers.
- In July 2023, Global Chemicals and Petrochemicals Manufacturing Hubs in India (GCPMH 2023) was organized in Delhi, India.
- In June 2023, Himadri Speciality Chemical invested Rs. 58 crore (US$ 7.01 million) in Sicona Battery Technologies Pty Ltd, (Sydney) for a 12.79% stake.
- In June 2023, Mumbai-based UPL Ltd, will hive off its speciality chemicals business on a slump sale basis to a wholly owned arm of UPL Speciality Chemicals Ltd for Rs. 3,572 crore (US$ 431.96 million).
- In June 2023, Reliance plans to invest Rs. 75,000 crore (US$ 9.06 billion) over 5 years to expand its oil to chemical business.
- Tata Chemicals intended to invest about Rs. 8,000 crore (US$ 967.45 million) over the next 2-3 years as capex on an expansion spree that includes scaling businesses sustainably.
- In May 2023, Reliance Industries plans to set up a 10 GW solar project in Andhra Pradesh.
- In March 2023, Chennai awaits more bio-CNG plants to enable a switch to clean energy.
- On February 15th, 2023, the Indian Speciality Chemical Manufacturer’ Association (ISCMA) signed an MoU with USIIC to promote trade in speciality chemicals.
- In February 2023, the company is setting up a new formaldehyde plant with 300 TPD capacity at the existing manufacturing facility at GIDC, Ankleshwar in Gujarat.
- In January 2023, Tata Chemicals Europe signed a pact with Essar-backed Vertex for the sale of low-carbon hydrogen.
Government Initiatives
The government has started various initiatives such as mandating BIS-like certification for imported chemicals to prevent dumping of cheap and substandard chemicals into the country.
The Indian government recognises the chemical industry as a key growth element and is forecast to increase share of the chemical sector to ~25% of the GDP in the manufacturing sector by 2025.
- Under the Union Budget 2025-26 the government allocated Rs. 1,61,965 crore (US$ 18.7 billion) to the Ministry of Chemicals and Fertilizers.
- In February 2025, the government has implemented enhanced quality compliance requirements via Quality Control Orders (QCOs) for more than 150 products across various sectors, including household appliances and industrial materials. This initiative, overseen by the Bureau of Indian Standards (BIS), aims to enforce stricter safety and performance standards.
- In April 2023, the Cabinet approved the National Medical Devices Policy, 2023.
- The Department of Chemicals & Petrochemicals intends to bring PLI in the chemical & petrochemical sector and will redraft the Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) guidelines.
- PLI schemes have been introduced to promote Bulk Drug Parks, with a budget of Rs. 1,629 crore (US$ 213.81 million).
- The Government of India is considering launching a production-linked incentive (PLI) scheme in the chemical sector to boost domestic manufacturing and exports.
- 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 a 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.
- 100% FDI is allowed under the automatic route in the chemicals sector with a few exceptions that include hazardous chemicals. FDI inflows in the chemicals sector (other than fertilizers) reached Rs. 1,39,776 crore (US$ 22.8 billion) between April 2000-September 2024.
- The government has proposed several incentives for setting up a sourcing or manufacturing platform within an Indian SEZ:
- Single window clearance for central and state-level approvals.
- Duty-free import/domestic procurement of goods for development, operation and maintenance of SEZ units.
Road Ahead
Post the pandemic, the Indian chemical industry has captured opportunities considering the supply chain disruption in China and the trade conflict between the US, Europe and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments.
Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs to encourage downstream units will enhance production and development of the industry. The dedicated integrated manufacturing hubs under the Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIR) policy to attract an investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035.
To bring about structural changes in the working of the domestic chemical industry, future investments should not only focus on the transportation of fuels such as petrol and diesel but also on crude-to-chemicals complexes or refineries set up to cater to the production of chemicals.
Note: The conversion rate used for April 2025 is Rs. 1 = US$ 0.011
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