India’s Chemicals Sector: A Growing Global Powerhouse

India’s chemicals industry is on a remarkable growth trajectory, cementing its place as a significant global player. Valued at USD 220 billion in 2023, the sector is projected to expand to USD 383 billion by 2030, driven by an anticipated compound annual growth rate (CAGR) of 8.1%. The robust development is bolstered by increasing foreign direct investment (FDI), innovative policies, and the sector’s growing importance in global markets.

The Scale of Growth

India’s chemicals industry is the sixth largest globally by sales, with FDI inflows reaching an impressive USD 21.7 billion between April 2000 and September 2023. This achievement is attributed to 100% FDI under the automatic route, which has enhanced investor confidence and facilitated large-scale investments.

Moreover, India’s Petroleum, Chemical, and Petrochemical Investment Regions (PCPIRs) are expected to attract USD 420 billion in investments, further emphasizing the sector’s growth potential. These regions, supported by government initiatives and favorable policies, aim to boost industrial infrastructure and production capabilities.

Skill Development Driving Industry Growth

India is not just investing in infrastructure but also in its workforce. Establishing seven Central Institutes of Petrochemicals Engineering & Technology (CIPET) and the Institute of Pesticide Formulation Technology (IPFT) underscores the government’s commitment to skilling the labor force. This initiative ensures the availability of a talented workforce, critical for sustaining growth and innovation in the sector.

Rising Exports and Specialty Chemicals

The chemicals sector is a major contributor to India’s export economy, accounting for 12% of total exports. Specialty chemicals, a key driver of growth, are forecasted to grow at a CAGR of 12% between 2020 and 2025. This growth is fueled by innovations and rising demand in industries like electronics, automotive, and packaging.

Future Outlook: Market Metrics and Employment Growth

By 2024, the chemicals market in India is expected to achieve:

• Value-added output of USD 29.7 billion, growing at a CAGR of 3.26% from 2024 to 2029.
• Market output of USD 143.3 billion, with a CAGR of 2.71% over the next five years.
• Enterprise growth, with 15,730 businesses expected to operate, increasing enterprise density to 11 per 100,000 population.

Employment in the sector is also projected to rise, reaching 1 million jobs by 2024 with a CAGR of 3.19%, highlighting its role as a significant employment generator.

Key Growth Drivers

1. Domestic Consumption: Rising demand from industries like automotive, packaging, and agriculture is driving growth.
2. Government Policies: Supportive policies, including the PCPIR scheme and infrastructure development, create a favorable investment environment.
3. Cost Competitiveness: India’s skilled labor availability at competitive rates enhances its appeal to multinational firms diversifying their sourcing strategies.
4. Sub-sector Growth: Specialty chemicals, agrochemicals, and petrochemicals are leading the charge with impressive CAGRs of 11.5%, 8.3%, and 11%, respectively, projected until 2027.

Conclusion

India’s chemicals industry is not only expanding in scale but also evolving as a global leader in innovation and sustainability. With robust investments, favorable policies, and a skilled workforce, the sector is poised to achieve remarkable milestones. By fostering domestic consumption and capitalizing on export potential, India’s chemicals market is set to drive significant economic growth in the coming years, reinforcing its position as a global chemical powerhouse.