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DART
CONSULTING FORECASTS HIGHER GROWTH IN THE NEXT FIVE YEARS
The chemical industry in India stands as a one of the
pillars of the nation’s economy. It contributes
7% to the Gross Domestic Product (GDP). This sector has demonstrated remarkable
resilience and emerges as one of the few industries that not only withstood the
challenges posed by the global pandemic but also experienced substantial
growth. Ranked as the 6th largest chemical producer worldwide and the 3rd
largest in Asia, India’s chemical industry is primed to harness upcoming
opportunities and solidify its global presence.
Industry Performance
India’s chemical industry is incredibly diverse, covering
over 80,000 commercial products and encompassing bulk chemicals, specialty
chemicals, agrochemicals, petrochemicals, polymers, and fertilizers. As the
sixth largest chemical producer globally and third in Asia, it contributes 7%
to India’s GDP.
On the global stage, India is a major player, ranking
fourth in agrochemical production, accounting for a significant share of
dyestuff and dye intermediate output, and boasting a 15% global market share in
colorants. The country’s chemical industry is de-licensed, with a few hazardous
chemicals being exceptions. India’s position in chemical exports and imports is
strong, standing 14th in exports and eighth in imports worldwide (excluding
pharmaceuticals). India’s strategic proximity to the Middle East, a key source
of petrochemical feedstock, positions it advantageously for economies of scale,
further boosting its chemical industry’s potential.
The performances of key companies in the industry give
indications that the industry is profitable and has greater growth
opportunities. The reported margin of the industry by analyzing the key players
was around 11.3% by taking into consideration the last 3 years’ data.
Industry Trends
The Indian Chemicals and Petrochemicals sector has
displayed remarkable growth and significance in the global trade landscape,
securing its position as a pivotal contributor to India’s inclusive trade flow.
With consistent rankings as the third-largest chemical importer and the
fourth-largest exporter over the past five years, this sector’s influence
remains undeniable. Several industry trends have emerged, highlighting the
sector’s potential for sustained development and prosperity.
The sector is poised for a transformative journey driven
by global export growth, government initiatives, favorable manufacturing
conditions, rising domestic demand, and the industry’s resilience in overcoming
challenges. Here are some of the growth divers that is propelling the industry
are:
·
Liberalized Industry Environment: The
industry operates in a deregulated and de-licensed framework. 100 percent
Foreign Direct Investment (FDI) is permitted through the automatic route.
Manufacturing of various chemical products, including organic, inorganic,
dyestuffs, and pesticides, is free from licensing constraints.
·
Expanding Infrastructure: Dedicated
industrial zones in Tamil Nadu, Gujarat, Andhra Pradesh, and Odisha span 250
sq. km., providing manufacturing facilities and comprehensive logistical
support. Establishment of plastic parks to optimize capacities and enhance
operational efficiencies.
·
Enhanced Raw Material Accessibility:
Investments are being directed towards increasing domestic raw material
production to lessen reliance on imports.
As per the Union Budget 2022-23:
·
The government is enforcing BIS-like
certification for imported chemicals to prevent the influx of substandard
products.
·
The government aims to increase the chemical
sector’s share in the manufacturing GDP to around 25% by 2025.
·
Rs. 209 crores (US$ 27.43 million) have been
allocated in the Union Budget 2022-23 to the Department of Chemicals and
Petrochemicals.
·
The introduction of Production Linked Incentive
(PLI) schemes, including Rs. 1,629 crores (US$ 213.81 million) for Bulk Drug
Parks, aims to invigorate the sector.
·
Through analyzing the performance of the
contributing companies for the last three years, we can ascertain that the
sector witnessed a compounded annual growth rate (CAGR) of 13.1% at the end of
2022.
The Indian Chemicals and Petrochemicals sector is on the
cusp of a transformative phase, guided by strategic government initiatives and
evolving market dynamics. The industry’s trajectory is underscored by stringent
quality control measures, bold growth targets, and financial backing through
PLI schemes and budgetary allocations. A visionary roadmap towards
self-sufficiency and global leadership is evident through end-to-end ecosystem
development and targeted incentives. This sector’s ascent not only promises
economic vitality but positions India as a formidable contender in the global
chemicals domain, promising innovation, and growth in the years ahead.
Given these facts, the industry is likely to grow at the
current growth rate and is expected to exhibit a CAGR of 13% in the next five
years from 2023 to 2027.
DART Consulting provides business consulting through its
network of Independent Consultants. Our
services include preparing business plans, market research, and providing
business advisory services. More details at https://www.dartconsulting.co.in/dart-consultants.html
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