Editorial May 2024 Growth Drivers in the Chemical Industry

Rajiv Parikh

21 Jun 2024

Chemicals industry in India is highly diversified, covering more than 80,000 commercial products. It is broadly classified into Bulk chemicals, Specialty chemicals, Agrochemicals, Petrochemicals, Polymers and Fertilizers. India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, makes for economies of scale.

India is a strong global dye supplier, accounting for approximately 16% of the world production of dyestuff and dye intermediates. Chemicals industry in India has been de-licensed except for few hazardous chemicals. Upcoming Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and Plastic parks will provide state-of-the-art infrastructure for Chemicals and Petrochemicals sector.

The production of Total Major Chemicals and Petrochemicals in 2022-23 (up to Sept 2022) is 26570 thousand MT.
CAGR in the production of Total Chemicals and Petrochemicals during the period 2017-18 to 2021-22 is 4.61%.
India ranks 11th in the World Exports of Chemicals (excluding pharmaceutical products) and ranks 6th in the World Imports of Chemicals (excluding pharmaceutical products).
FDI in Chemicals sector (excluding fertilizers) is $21.71 (Apr 2000 to Sept 2023)
Indian chemical industry employs more than 2 Mn people.
The production of Major Chemicals in 2023-24 (up to Aug 2023) is 53.54 Lakh Tonnes.
The combined exports of Major Chemicals and Major Petrochemicals in the year in 2023-24 (Apr 2023- Aug 2023) has decreased to INR 44.09 Thousand Cr from INR 59.86 Thousand Cr over the corresponding period of last year (Apr 2022-Aug 2022).

100% FDI is allowed under the automatic route in the chemicals sector (except in the case of certain hazardous chemicals).

According to Invest India, the following are the key points for growth drivers:

There has been an uptrend in the rising disposable income, median age of population, urbanisation and growing penetration and demand from rural markets.
The shift in production and consumption towards Asian and Southeast Asian countries in all sectors is leading to increasing demand for the chemicals and petrochemicals.
There has been a constant shift in consumer preferences towards a healthier lifestyle and environment-friendly products like the electric vehicles and power generation including solar, wind and hydro power.
The Production Linked Incentives (PLI) schemes for manufacturing of Advance Cell Chemistry Battery has been in the forefront under the Atmanirbhar Bharat Abhiyan.

The market size of Chemicals & Petrochemicals sector in India is around $215BN and is expected to grow to $300 Bn by 2025. The following are the key points to consider:

Exports of Chemicals and Chemical products (excluding pharmaceutical products and fertilizers) contributed 11.7% of total export in the year 2021-22 compared to 12.9% in the year 2020-21. It contributed 10.8% of total export in the year 2022-23 (up to Sept 2022).
CAGR in Export of total Chemicals and Chemical products (excluding pharmaceutical & fertilizer products) during the period 2017-18 to 2021-22 was 13.86% while CAGR of total national export was 12.62%.
The compounded average growth rate(CAGR) during the period 2017-18 to 2021-22 was 4.4% for manufactured product based on WPI while it was 4.4% for Chemicals and Chemical Products.
The Index of Industrial Production of Chemical & Chemical products achieved record to 137.2 in Jul, 2022 as against the lowest value of 109.1 recorded in May 2021.
The quantum of production of Major Chemicals decreased to 53.54 Lakh Tonnes during 2023-24 (up to Aug 2023) as compared to 54.32 Lakh Tonnes during the corresponding period of the previous year.
The quantum of production of certain Petrochemicals such as Synthetic Detergent
Intermediates was 34.07 Lakh Tonnes in 2023-24 (up to Aug 2023)
Production of Organic Chemicals has increased (Up to Aug 2023) as compared to the corresponding period of the previous year, recording an increase of 4.52%.
The quantum of production of Major Petrochemicals increased (up to Aug 2023) compared to corresponding period of previous year recording an increase of 6.08%