India Country Commercial Guide
Learn about the market conditions, opportunities, regulations, and business conditions in india, prepared by at U.S. Embassies worldwide by Commerce Department, State Department and other U.S. agencies’ professionals
Select Country Guide
Chemicals
Last published date:

Overview

India’s diversified chemicals industry covers over 80,000 commercial products that are broadly classified into bulk chemicals, specialty chemicals, petrochemicals, agrochemicals, polymers, and fertilizers. The Indian chemicals industry is valued at $220 billion and is projected to grow at 9 -12 percent per annum to reach $300 billion by 2026. The specialty chemicals sector is expected to contribute significantly to overall industry growth and is expected to reach $40 billion by 2026.

Approximately 70 percent of India’s chemical production is consumed domestically. Commodity chemicals constitute 25 percent of the market, while specialty chemicals, petrochemicals, and agrochemicals have 21, 15, and 19 percent of the market, respectively. Biotech and pharmaceuticals (including active pharmaceutical ingredients) together constitute 20 percent of the total market.

The Indian chemicals industry is a major player in the global market, ranking 6th in production and 14th in exports. Specialty chemicals, especially agrochemicals, dyes, and pigments, account for over 50 percent of exports from India. Imports across the sector have increased steadily in recent years, with petrochemical intermediates accounting for over 30 percent of total imports. The United States exported in India approximately $5.2 billion in chemical products (HS 28 through 39, excluding HS 30) between 2013 to 2022, with an annualized growth rate of five percent. The fastest growing categories of U.S. exports include HS 29 Organic Chemicals and HS 33 cosmetics products and inputs, both growing at nine percent per annum, followed by plastics and resins (HS 39), albuminoidal substances (HS 35) and soaps and lubricants (HS 34), all growing at seven percent per annum.[1]

Policy and Tax Environment

Foreign companies seeking to invest in India have two options: an Indian subsidiary; or a joint venture with an Indian company via a Foreign Technology Agreement (FTA). Foreign Technology Agreements in India permit the transfer of technology with government approval or through the automatic route as designated by the Reserve Bank of India. Payments pertaining to such technology transfers should not exceed $2 million. Royalties are restricted to five percent for domestic sales, eight percent for exports, and total payments must be eight percent on sales for a period of ten years. Royalty periods should not exceed seven years from the date of starting a business, or ten years from the date of signing an agreement. The goods and service tax rate on almost all chemicals is 12 percent. The customs duty on most feedstocks varies from five to ten percent and stands at ten percent for dyestuffs.

India is also increasingly requiring both specialty chemical importers and domestic companies to follow quality standards established by the Bureau of Indian Standards (BIS), which may require importers to obtain a certification from the BIS for their production facility known as the BIS Mark.

Opportunities

With a growth rate of 9-12 percent, the specialty chemicals segment has experienced increased demand due to growing consumption of hygiene products, packaged foods, energy drinks, and nutraceuticals. U.S. companies have the opportunity to export to India intermediates/fine chemicals, adjuvants, surfactants for agrochemical applications, specialty products for seed treatment, and fertilizers and fluorochemical compounds for agrochemical and pharmaceutical applications. Opportunities also exist for enzymes and plant-based extracts for household care applications and probiotic and keratin-based actives, conditioning actives, and glutathione for personal care applications.

Stringent regulations pertaining to emission norms, urbanization and industrialization growth, and use of digital technology are expected to transform the specialty chemicals industry. Construction, flavor and fragrances, homecare ingredients, cosmetics, adhesives, water treatment chemicals, and dyes and pigments would constitute the highest growth sectors.

India is seeking to increase imports of technologies to aid local chemical manufacturing used in the production of lithium-ion batteries. The Indian government is also implementing a PLI scheme in the chemicals sector to drive adoption of new technologies and boost domestic manufacturing and exports. Such measures provide opportunities for U.S. companies interested in supplying raw materials and technical expertise.

Indian oil and gas companies are turning their sights towards downstream opportunities to invest in value added manufacturing via the petrochemicals sector. This presents export and investment opportunities for U.S. companies to participate these opportunities by providing technology solutions and expertise.

U.S. companies are also positioned to provide environmental technologies that reduce greenhouse gas emissions and raise productivity and international competitiveness, such as capture of heat, carbon, and other waste biproducts from chemical manufacturing for reuse, thereby creating opportunities for partnerships with emerging Indian chemical manufacturers.

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

[1] Data and analysis from Standard and Poor’s Global Trade Atlas and the U.S. International Trade Administration, U.S. Department of Commerce.