Chemicals Industry



India is the third largest producer of chemicals in Asia by volume. It is also the fourth largest producer of agrochemicals and sixth largest producer of chemicals in the world. The chemical industry plays a vital role in the growth of Indian economy, accounting for nearly 3.4% of the global chemical industry by volume. It is one of the most diversified of all industrial sectors, covering an array of more than 70,000 commercial products. The industry is the mainstay of industrial and agricultural development of the country and provides building blocks for several downstream industries like chemical and other related products, petrochemicals, fertilizers, paints, varnishes, gases, soaps, perfumes, toiletry, and pharmaceuticals.


The exports of the Indian chemicals were registered at US$ 22 billion in 2017-18, up from US$ 17.6 billion in 2013-14, thereby recording an AAGR of 5.9%, during this period. During the first half of FY 18-19, the chemicals exports had already crossed the figure of US$ 15 billion.

Exports of chemicals from India
Year Inorganic Chemical Organic Chemical Tanning and Dye Extracts Insecticides and Fungicides Overall Chemical Exports
  HS Code 28 HS Code 29 HS Code 32 HS Code 3808  
2011-12 1793.9 11693.5 1947.9 1427.9 16863.2
2012-13 1318.7 12105.6 2089.8 1740.1 17254.1
2013-14 1364.2 12017.6 2547.6 1922.3 17851.6
2014-15 1429.9 11948.9 2818.6 1949.9 18147.3
2015-16 1207.3 11509.3 2471.3 1963.0 17151.0
2016-17 1363.5 11688.6 2564.0 2136.7 17752.8
2017-18 1733.6 14796.8 2940.0 2555.7 22026.1
(April –Sept)
1183.8 10397.8 1909.1 1655.5 15146.2
Source: DGCIS
Export Destinations of Inorganic Chemicals from India (2017-18)
Country Export Value (US$ mn) Share (%)
UAE 291.7 18
China 130.6 8.1
USA 100.5 6.2
Egypt 70.6 4.4
Iran 68.9 4.3
Malaysia 59.9 3.7
Korea 48.0 3
Vietnam 46.8 2.9
Indonesia 44.1 2.7
Bangladesh 42.5 2.6
Total 1618.4 100.0
Source: DGCIS

Export Destination of Organic Chemicals from India (2017-18)
Country Export Value( US$ Mn) Share (%)
China 1695.7 12.5
USA 1547.0 11.4
Germany 554.2 4.1
Saudi Arabia 523.0 3.9
Netherlands 419.4 3.1
Japan 410.4 3
Spain 392.5 2.9
Brazil 387.9 2.9
Korea 376.3 2.8
Belgium 371.2 2.7
Total 13564.7 100.0

Export Destinations of Dyes and Tanning Extracts from India (2017-18)
Country Export Value( US$ Mn) Share (%)
USA 219.3 7.9
Bangladesh 190.2 6.8
Germany 181.0 6.5
Turkey 171.6 6.2
China 156.3 5.6
Brazil 113.6 4.1
Italy 107.7 3.9
Indonesia 97.9 3.5
Netherlands 94.6 3.4
Thailand 82.0Q 2.9
Total 2786.4 100.0

Export Destinations of Insecticides and Fungicides from India (2017-18)
Country Export Value( US$ Mn) Share (%)
USA 458.0 18.8
Brazil 374.3 15.4
Japan 127.0 5.2
France 102.3 4.2
Vietnam 77.7 3.2
Belgium 73.5 3
Bangladesh 67.6 2.8
China 66.9 2.7
Netherlands 66.8 2.7
Total 2436.3 100

Foreign Direct Investments

100% Foreign Direct Investment (FDI) is allowed under the automatic route in the chemicals sector, subject to all the applicable regulations and laws. FDI in the chemicals segment was approximately US$ 15.3 billion during the period April 2000 to June 2018 accounting for 4.37 % of the total FDI inflows in the country.


Indian chemical industry is a diversified industry and is the mainstay of industrial and agricultural development of the country. The sector provides building blocks for several downstream industries. Government initiatives like CBEC’s Single Window Interface for Facilitating Trade (SWIFT), Make in India, and relaxation of environmental norms for the chemical industry, which will likely encourage the growth of chemical sector. However, the industry faces some serious issues such as availability of key feedstock, infrastructure status, scale of operations, energy security and ease of doing business etc. These issues have hampered industry growth and it needs government interventions to achieve its true potential.

However, the industry has the potential to overcome the abovementioned challenges through adoption of alternate feedstock, increasing investment in R&D and achieving scale through collaboration. Further, the sector is likely to perform well in coming time on the back of higher demand from Agrochemicals and Speciality Chemicals segments. Significant growth in Petrochemicals segment too will provide the Chemical sector the much needed fillip.



Select Government Incentives

In order to promote exports in the industry, Government has introduced various State incentives, financial incentives, Area based incentives and R&D incentives, few of which are mentioned below:

  • A weighted deduction of 200% is granted to assess for any sums paid to a national laboratory, university or institute of technology, for specified persons with a specific direction, provided the said sum is used for scientific research within a programme approved by the prescribed authority.
  • Each state in India offers additional incentives for industrial projects. Incentives are in areas like subsidized land cost and relaxation in stamp duty exemption on sale/lease of land, power tariff incentives, concessional rate of interest on loans, investment subsidies/tax incentives, backward areas subsidies, special incentive packages for mega projects etc.
  • Incentives for units in Special Economic Zones (SEZ)/National Investment and Manufacturing Zones (NIMZ) as specified in respective Acts or setting up projects in special areas like the North-east, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

To develop skilful manpower in the industry, the government has introduced various means in the form of research entities, schemes and councils; few of which are mentioned below:

  • Provision of Grant-in-aid to educational/research institutes for setting up Centre of Excellence (CoE) with a view to improve existing petrochemicals technology and promote development of new applications of polymers and plastics.
  • Under the Chemicals Promotion Development Scheme (CPDS), government provides Grant-in-aid for creation of knowledge products through studies, survey, data bank, promotion materials etc. to facilitate development of the sector.
  • To strengthen civil and technical infrastructure, research and development capacities and academic and training initiatives, budgetary allocations are made towards CIPET (Central Institute of Plastic Engineering and Technology).

Key points in the Union Budget 2018-19

A total of US$ 30 million has been allotted to the Department of Chemicals & Petrochemicals during FY2018, where in, CIPET (Central Institute of Plastic Engineering and Technology) is allotted US$ 12.86 million

Allocation made towards certain Central Government Schemes/ Projects are:

  • Assam Gas Cracker Project- US$ 1,538 million
  • Chemical Promotion and Development Scheme- US$ 0.46 million
  • Promotion of Petrochemicals US$ 8.53 million