India’s chemical industry is rapidly emerging as a key player on the global stage, driven by strong demand, government support, and a diversified product portfolio. With a market size valued at US$220 billion in 2022, the sector is poised for remarkable growth, projected to reach US$300 billion by 2025 and an ambitious US$1 trillion by 2040, according to the India Brand Equity Foundation (IBEF). Employing over 2 million people and contributing 7% to India’s GDP, this industry is a cornerstone of economic development. Let’s dive into the facts, statistics, and trends shaping the chemical sector in India.
India’s Global Standing in the Chemical Industry
India holds a significant position in the global chemicals market, accounting for 3.4% of the worldwide industry. It ranks as the:
- Third-largest consumer of polymers globally.
- Fourth-largest producer of agrochemicals.
- Sixth-largest producer of chemicals overall.
The country is also a dominant force in specific segments. For instance, India is the world leader in dye manufacturing, contributing 16-18% of global dyestuff exports and shipping to over 90 countries. Between April and December 2023, dye exports alone totaled US$1.69 billion. Additionally, India leads in castor oil production, commanding 85-90% of global exports, and supplies over 50% of the world’s vaccine demand, reinforcing its leadership in generics and biosimilars.
Key Segments of the Indian Chemical Market
The chemical industry in India is split into five major segments:
- Bulk Chemicals: Includes organic, inorganic, and alkali chemicals produced on a large scale.
- Petrochemicals & Polymers: Derivatives used in plastics, packaging, and automotive industries.
- Fertilizers: Essential for agriculture, categorized into phosphate, potassium, and nitrogenous types.
- Specialty Chemicals: High-value, low-volume products tailored for specific applications like paints, coatings, and textiles.
- Agrochemicals: Crop protection chemicals such as insecticides, herbicides, and fungicides.
In 2022-23, alkali chemicals dominated production, making up 73.3% of total chemical output. Meanwhile, the specialty chemicals segment is experiencing robust growth, valued at US$32 billion in 2019 and expected to reach US$64 billion by 2025, growing at a CAGR of 12.4%.
Growth Drivers Fueling the Chemical Sector
Several factors are propelling the chemical industry’s expansion in India:
- Rising Demand:
- End-user industries like food processing, personal care, and home care are boosting specialty chemicals demand.
- The automotive, construction, and textile sectors are driving growth, with initiatives like Smart City projects increasing the need for construction chemicals.
- India’s agrochemical market, currently worth US$5.5 billion, is growing at a CAGR of 8.3% and is projected to hit US$7.4 billion by 2026.
- Policy Support:
- The government allows 100% FDI under the automatic route (except for hazardous chemicals), attracting US$22.70 billion in FDI inflows between April 2000 and June 2024.
- The Production-Linked Incentive (PLI) schemes, including a budget of Rs. 1,629 crore (US$213.81 million) for Bulk Drug Parks, aim to enhance domestic manufacturing.
- Four Petroleum, Chemicals, and Petrochemicals Investment Regions (PCPIRs) have been established, with the Dahej PCPIR in Gujarat attracting investments of Rs. 1 lakh crore (US$12 billion) and creating 32,000 jobs.
- Increasing Investments:
- An estimated Rs. 8 lakh crore (US$107.38 billion) investment is projected by 2025.
- In September 2023, Prime Minister Narendra Modi laid the foundation for development projects worth Rs. 50,700 crore (US$6.11 billion) in Bina, Madhya Pradesh, boosting ethylene and propylene production.
- Global Supply Chain Shift:
- With companies adopting the China+1 strategy to diversify supply chains, India is emerging as a preferred manufacturing hub, especially for specialty chemicals.
Production and Trade Statistics
India’s chemical production capacity is impressive. In August 2024:
- Major chemical production: 978.08 million metric tonnes (MMT).
- Petrochemical production: 1,889.78 MMT.
- Specific outputs included 264.49 MMT of soda ash, 313.23 MMT of caustic soda, and 24 MMT of pesticides and insecticides.
On the trade front, from April to September 2024:
- Exports of organic chemicals: US$3.99 billion.
- Exports of inorganic chemicals: US$1.09 billion.
- Agrochemical exports: US$2.09 billion.
- Imports of organic chemicals: US$8.56 billion.
India ranks 9th globally in chemical exports and 6th in imports (excluding pharmaceuticals), exporting to over 175 countries in 2022-23, with key markets including the USA, China, Turkey, and Northeast Asia.
Specialty Chemicals: A Rising Star
The specialty chemicals sector is a standout performer, expected to grow from 3-4% of the global market in 2021 to 6% by 2026. This growth is fueled by:
- International Demand: Environmental shutdowns in China since 2018 have shifted production to India.
- End-User Industries: Paints, coatings, textiles, and construction chemicals are seeing increased demand due to urbanization and rising incomes.
- Export Potential: Agrochemical exports are projected to exceed Rs. 80,000 crore (US$9.61 billion) over the next four years, per the Agro Chem Federation of India (ACFI).
Sustainability and Innovation
Indian chemical companies are prioritizing sustainability:
- Green Initiatives: NTPC REL and GACL signed an MoU in July 2022 for India’s first commercial-scale Green Ammonia and Green Methanol plants.
- R&D Investment: With 200 national laboratories and 1,300 R&D centers, the industry spends around 1% of its revenue on innovation.
- Recycling Focus: Projects emphasize recycling plastics and producing biofuels from renewable sources.
Leading Players in the Chemical Sector
Key Indian companies include:
- Pidilite Industries: Adhesives and construction chemicals.
- Tata Chemicals: Soda ash and marine chemicals.
- Reliance Industries: Polymers and polyesters.
International giants like BASF India, DuPont India, and ExxonMobil India also have a strong presence, contributing to the sector’s dynamism.
Future Outlook
The Indian chemical industry is on a trajectory to contribute US$383 billion to GDP by 2030 and reach US$1 trillion by 2040. With government initiatives like the Make in India campaign, a skilled workforce, and growing global demand, India is well-positioned to solidify its status as a chemical manufacturing powerhouse.
For businesses and investors, the sector offers immense opportunities, from specialty chemicals to sustainable innovations. As India continues to expand its global footprint, the chemical industry remains a vital driver of economic growth and industrial advancement.