India’s Chemical Export Industry: Set for Growth Amid Global Challenges

India’s chemical export sector is on track to achieve new heights, with CHEMEXCIL Director General Raghuveer Kini expressing optimism about meeting the US$ 31 billion export target for FY 2024-25. Despite global economic headwinds, strong demand from major markets such as Brazil, the US, and Japan is driving this growth.

Key Highlights of India’s Chemical Export Sector

Positive Performance in FY24

• Exports So Far: Chemical exports reached US$ 14.1 billion in the first half of FY24, marking a 4.57% increase over the previous year.
• Target for FY25: US$ 31 billion, driven by robust demand and government-backed initiatives.

Growth Drivers

1. Diverse Export Portfolio: India excels in exporting basic chemicals, cosmetics, dyes, and agrochemicals.
2. High Standards: Indian chemicals adhere to stringent global norms like REACH, ensuring market access in regions with strict regulations.
3. Market Expansion: India’s chemical exports to South America, especially Brazil, contribute approximately US$ 1 billion annually.

Opportunities and Challenges

Opportunities

1. EU Market Compliance: India’s ability to meet European Union’s CBAM regulations positions it competitively in the European market, which is increasingly focusing on carbon-neutral trade practices.
2. Increased Demand from End-Use Industries: Pharmaceuticals, agriculture, and manufacturing industries are driving exports, leveraging India’s high-quality chemical production.
3. Awareness Initiatives: CHEMEXCIL is conducting programs to educate exporters on EU carbon taxes and quality control orders, enabling better preparedness.

Challenges

1. Port Infrastructure Issues: Poor logistics and congestion at critical ports like Nhava Sheva and Mundra hinder smooth shipments, necessitating urgent infrastructure upgrades.
2. Payment Bottlenecks in Russia: Sanctions on designated banks, including Sberbank, under the rupee-ruble trade mechanism have created payment challenges. Solutions include expanding the network of authorised banks in both countries.

Addressing Global Market Dynamics

Carbon Border Adjustment Mechanism (CBAM)

The EU’s CBAM, a tax on high-carbon import sectors like chemicals, steel, and fertilizers, poses both a challenge and an opportunity for Indian exporters. By adopting sustainable practices, India can enhance its competitiveness and access to the European market.

Adherence to Global Standards

India’s chemical exports benefit from compliance with international regulations like:

• REACH (EU): Ensures safe handling of chemical substances.
• ISO Standards: Guarantees quality and environmental safety.

CHEMEXCIL’s Role in Driving Growth

Established by the Ministry of Commerce, CHEMEXCIL plays a pivotal role in promoting Indian chemical exports through:

1. B2B Engagements: Organizing trade events and business matchmaking opportunities.
2. Capacity Building: Educating exporters on global regulations and market trends.
3. Policy Advocacy: Addressing systemic bottlenecks, such as payment issues and port infrastructure challenges.

The Path Ahead

Optimistic Growth Outlook

• The chemical sector’s robust growth trajectory is underpinned by increasing global demand and the rising prominence of Indian exporters.
• Government Support: Initiatives like the PLI (Production Linked Incentive) scheme for chemicals further boost the industry’s competitiveness.

Sustainable Practices for Long-Term Success

To maintain its competitive edge, India must:

1. Invest in green technology and sustainable manufacturing practices.
2. Develop a seamless logistics and trade ecosystem to address port and payment issues.

Conclusion

India’s chemical export industry is well-positioned to reach its ambitious targets, bolstered by strong global demand and government support. While challenges like port infrastructure and trade mechanism inefficiencies remain, initiatives by CHEMEXCIL and the adoption of sustainable practices will drive the sector forward.

By focusing on compliance, innovation, and infrastructure, India can solidify its position as a global leader in chemical exports, delivering on its promise of quality and reliability.