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. India is ranked sixth in the world in terms of sales and imports of chemicals (excluding pharmaceutical products). The Indian chemicals industry stood at $180 billion in 2020 and is projected to reach $304 billion by 2025.
Approximately 70 percent of India’s chemical production is consumed domestically. Bulk 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.
In 2020, India imported $56 billion and exported $41 billion worth of chemicals and petrochemicals. 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.
Policy and Tax Environment
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 10 percent for dyestuffs.
With a growth rate of 12 percent, the specialty chemicals segment has experienced increased demand due to growing consumption of hygiene products, packaged foods, energy drinks, and nutraceuticals. Specialty subsectors for flavors and fragrances, personal care chemicals, nutraceutical ingredients, and surfactants constitute the bulk of this growth. There are opportunities for U.S. companies to export 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. Increased demand from the construction, automotive, and water treatment industries could further boost growth in this segment.
India is seeking to increase imports of technologies to aid local chemical manufacturing, including acetic acid, acrylonitrile, and chemicals 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 toward downstream chemical opportunities in the petrochemicals sector. This presents export and investment opportunities for U.S. companies to participate these opportunities by providing technology solutions and expertise.
Recent trade tensions have affected bilateral trade between India and China, and this offers opportunities for international companies to bridge the supply chain gap. According to industry insiders, Indian companies are actively seeking alternatives to China for the supply of key materials and ingredients in the chemicals sector.
To learn more about opportunities in this sector, contact Commercial Specialist Sanjay Arya.