Chemical sector - Rising to meet the needs of an emerging economy

 

Within India's vibrant economy, there is a diverse sector focusing on innovation, investing in R&D with the support of the Government and increasing its foothold in the global market; this is the chemical sector in India.

 In the past 4 decades, the chemical sector in India has undergone a tremendous transformation. During this time, it has withstood and been through everything right from its establishment, consolidation and liberalization to expansion and globalization. This highly diverse sector covering more than 70,000 commercial products is the 12th largest in the world and the 3rd largest in Asia after China and Japan. It contributes almost 20% to the national revenue by means of taxes and accounts for 3% of India's GDP. This sector accounts for 13% share in total exports and 8% share in total imports of India. Exports in the chemical sector have grown steadily over the past decade with a CAGR of more than 10%. However, India still remains a net importer of chemicals with total imports close to USD 18 million in 2011.

 The chemical Industries in India are highly concentrated on the west coast of India, especially in states such as Gujarat & Maharashtra which house 63% of the industries in this sector. This multi-product and multi-faceted industry comprises of Petrochemicals, Inorganic and Organic Chemicals, Specialty chemicals, Bulk Drugs, Agrochemicals and their sub segments. The Indian chemical industry has evolved over time to meet the ever growing and demanding needs of an emerging economy. Recent trends observed in this industry include a strong focus on segments such as specialty chemicals and pharmaceuticals driven by investments in R&D. Within the specialty chemicals, construction and Polymer chemicals are expected to be the key segments that will see a high growth rate. The growing exports and high growth in this industry is expected to create a strong global positioning for Indian industries.

 Due to the huge potential and tremendous opportunities present in this sector, it has seen an FDI of USD 3 billion from FY2000 to FY2011. According to a recent market research report, the chemical sector in India is currently USD 91 Billion by size and is expected to grow to USD 150 Billion by 2017. Some of the main drivers that fuel this growth and continue to attract FDI are the rise in GDP and purchasing power and low cost manufacturing base with skilled science professionals and strong R&D capabilities. Apart from these factors, the increasing external demand, diversified portfolio of products and high internal consumption within the chemical sector itself (around 30%) also make this Industry interesting for foreign investors.

 

For more information about Indian market please have a look on IBEF's (India Brand Equity Foundation) presentation on Engineering in India:  » here