India - Commercial Guide
Chemical Industry

This is a best prospect industry sector for this country.  Includes a market overview and trade data.

Last published date: 2020-08-25

Overview

India has a diversified chemicals industry covering more than 80,000 commercial products, broadly classified into bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilizers.  India ranks 14th in export and 8th in import of chemicals (excluding Pharmaceuticals products) globally.  India is a strong global dye supplier, accounting for approximately 16 percent of the world production of dyestuff and dye intermediates.

The market size of the chemicals industry in India stood at $163 billion in 2017-18.  Total production of major chemicals and petrochemicals stood at 27,847 MT during 2018-19, a growth of 4.15 percent over 2017-18. 

Alkali chemicals had the largest share in the chemical industry in India with approximately 69 percent share in the total production.  Production of polymers account for around 61 percent of total production of basic major petrochemicals.

The Indian chemical industry, growing at over ten percent for the past ten years, is estimated to have 40,000-50,000 companies, of which the top companies - including 40 multinationals - are members of the Indian Chemical Council (ICC).  The 400 members of ICC contribute about 85 percent to India's chemical production.

Opportunities

The Indian chemical industry, led by the Indian Chemical Council (ICC), has set a goal of doubling turnover from the current $150 billion to $300 billion by 2025, provided the government extends its support to the proposed infrastructure and policy changes.  This will require an investment of about $75-100 billion and the target is to reduce import dependency and improve exports. 

Several global oil and gas majors are turning their sights on downstream chemical opportunities in the Indian petrochemicals sector in India leading to a higher focus and investments in the sector.

The imposition of stricter environmental norms in China which led to the closure of over 40,000 units could lead to uncertainty for international players sourcing from China, thereby creating opportunities for Indian chemical suppliers.

The recent trade conflicts between China, Europe and the United States have affected bilateral trade providing opportunities for players based in India to bridge the supply chain gap.

Barriers:

The Indian chemical industry is highly competitive with over 50,000 manufacturing units functioning in the sector.  The majority of these manufacturers are present in the bulk chemical segment where economies of scale are critical to sustain this thin margin business.  This calls for high upfront capital investment creating a barrier for smaller firms.  As a result, there are only a few large players in the basic chemical segment.  In the specialty chemicals sector, the focus is on technology and research and development (R&D) and strength of patents which will need high spending power to invest in technology and R&D and withstand losses till a product reaches commercial scalability.

While India has the capability to compete globally in specialty and value-added chemicals, lack of capacities in bulk chemicals has been a big concern since India lacks incentives for raw materials, infrastructure and power when compared to countries like China.  According to Industry sources, the various Free Trade Agreements (FTAs) India has entered with different nations have been disastrous for the industry.    Furthermore, the government of India has initiated actions like mandating certifications for imported chemicals to prevent dumping of cheap and substandard chemicals into the country with the cost borne by the importer.

Government Initiatives:

100 percent FDI is permissible under the automatic route through Reserve Bank of India (RBI) in the Indian chemical sector.  Manufacture of most chemical products inter-alia covering organic / inorganic dyestuffs & pesticides is de-licensed.  The entrepreneurs need only to submit the Industries Entrepreneur Memorandum (IEM) with the Department of Promotion of Industry and Internal Trade provided the location of the project falls outside standard urban areas of metropolitan cities.  Only the following items are covered in the compulsory licensing list because of their hazardous nature as required by international conventions; hydrocyanic acid and its derivatives, phosgene & its derivatives and isocyanates & di-isocyanates of hydrocarbons.  Foreign Technology Agreements in India permits transfer of technology by the means of Government approval or through the automatic route delegated by RBI.  The payments pertaining to the technology transfer should not exceed $2 million.  The royalty to be paid is restricted to five percent in case of domestic sales, eight percent in case of exports and total payment should be eight percent on sales for a period of ten years.  The royalty period should not exceed seven years from the date of starting of the business or ten years from the date of signing the agreement.  On most building blocks & feedstock, the duty is five percent (ethylene, propylene, crude, naphtha, benzene, toluene, xylene, ethyl benzene).  The Customs Duty on dyestuff segment is ten percent.  The Goods and Service Tax (GST) rate on almost all chemicals is 12 percent.

Resources

Export Promotion Opportunities:

ChemTech World Expo 2021

February 24-27, 2021, Mumbai, India.

For more information about opportunities in this sector contact U.S. Commercial Service Industry Special

Assocham and Resurgent India report on chemicals industry 

Invest India

Business Today news articles

McKinsey & Company: India’s Chemical Industry: Unleashing the next wave of growth

Global Business Reports – Indian Chemicals 2019 report

To learn more about opportunities in this sector, contact U.S. Commercial Service Industry Specialist: Sanjay Arya