Chemical Industry in India: Powering India’s Participation in Global Value Chains

The chemical industry in India is a key driver of economic growth, contributing significantly to manufacturing, exports, and employment, with strengths in petrochemicals, specialty chemicals, and agrochemicals, and growing global competitiveness.

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Context: NITI Aayog released its report “Chemical Industry: Powering India’s Participation in Global Value Chains”

Status of Chemical Industry in India

Size & Contribution:

India is the 6th largest chemical producer in the world and 3rd in Asia.
Contributes over 7% to India’s GDP; accounts for ~13% of total industrial output.
Employs over 2 million people.
India’s share in the global chemical value chain: ~3.5%.
Chemical trade deficit: USD 31 billion (2023) due to high dependence on imports, especially for speciality chemicals and feedstock.

Potential:

Rapid growth in demand for speciality and green chemicals.
Government targets a $1 trillion chemical sector by 2040, aiming for 12% global value chain share.
Expected to generate significant exports and skilled jobs with focused interventions.

Vision for 2030:

Target: 5-6% share in global chemical value chain, double current production, net-zero trade deficit, USD 35-40 billion extra exports, and 7 lakh new skilled jobs.
Modern clusters, advanced tech adoption, regulatory streamlining, robust talent pool.

Challenges Facing the Indian Chemical Sector

High Import Dependence: Heavy reliance on imported feedstock and speciality chemicals; limited domestic backward integration.
Infrastructure Gaps: Outdated chemical clusters, and inadequate port and logistics infrastructure lead to higher costs than global competitors.
Low R&D Investment: R&D spending only 0.7% (global average 2.3%), restricting innovation in high-value chemicals.
Regulatory Delays: Lengthy and opaque environmental clearance processes stifle agility and add compliance burden.
Talent Shortages: 30% shortfall in skilled professionals, especially in emerging areas like green chemistry, nanotech, and safety.
Fragmented Industry: A large number of small, fragmented players with low economies of scale.

Solutions / Interventions Proposed by NITI Aayog

World-Class Chemical Hubs: Upgrade and build new clusters; empower central committee and dedicated chemical fund for shared infrastructure.
Strengthen Port & Cluster Infrastructure: Develop high-potential clusters; improve port infrastructure with advisory chemical committees.
Opex Subsidy Scheme: Incentivize incremental production, import substitution, and export-oriented production through targeted subsidies.
Boost R&D and Technology Access: Allocate more funds for R&D; foster industry-academia partnerships; acquire advanced tech via global tie-ups.
Fast-Track Regulatory Approvals: Simplify and accelerate environmental clearance; enhance transparency and accountability.
Strategic FTAs: Negotiate FTAs with specific provisions for the chemical sector; improve exporter awareness and utilization.
Skill Development: Expand ITIs and specialized institutes; upgrade faculty; promote industry-relevant curriculum and training.