Chemicals Industry


 

Overview

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$ 26 billion in 2018-19, up from US$ 16.8 billion in 2011-12, thereby recording an CAGR of 6.7%, during this period.

Exports of Chemicals from India (US$ mn)
Year Inorganic Chemicals Organic Chemicals 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
2018-19 2011.72 18239.6 3306.1 3151.44 26708.8
Source: DGCIS

Export Destinations of Inorganic Chemicals from India (2018-19)
Country Export Value (US$ mn) Share (%)
UAE 360.0 17.7
Egypt 140.3 6.9
USA 112.4 5.5
Iran 86.6 4.3
China 73.3 3.6
Indonesia 68.4 3.4
Switzerland 68.1 3.4
Malaysia 60.4 3.2
Netherland 60.8 3
Vietnam 60.4 3
Total 2032.7 100.0
Source: ITC Trade Map

Export Destination of Organic Chemicals from India (2018-19)
Country Exports Value (US$ mn) Share (%)
China 3053.9 17.2
USA 1800.2 10.1
Germany 703.7 4
Indonesia 654.2 3.7
Brazil 566.7 3.2
Saudi Arabia 561.2 3.2
Malaysia 560.7 3.2
Spain 540.8 3
Netherland 520.6 2.9
Belgium 478.8 2.7
Total 17741.5 100.0
Source: ITC Trade Map

Export Destinations of Dyes and Tanning Extracts from India (2018-19)
Country Exports Value (US$ mn) Share (%)
USA 242.2 7.5
China 222.6 6.9
Bangladesh 212.4 6.6
Turkey 179.6 5.6
Germany 165.5 5.1
Brazil 132.2 4.1
Italy 130.0 4
Indonesia 120.9 3.7
Pakistan 114.4 3.5
Netherland 104.6 3.2
Total 3230.6 100.0
Source: ITC Trade Map

Export Destinations of Insecticides and Fungicides from India (2018-19))
Country Exports Value (US$ mn) Share (%)
USA 552.9 18.6
Brazil 552.9 18.6
France 114.0 3.8
Vietnam 86.1 2.9
Belgium 85.4 2.9
Japan 84.5 2.9
Bangladesh 75.8 2.6
China 75.4 2.5
Indonesia 72.2 2.4
Total 2964.8 100
Source: ITC Trade Map

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$ 16.5 billion during the period April 2000 to March 2019 accounting for 3.95 % of the total FDI inflows in the country.

Government initiatives like CBEC’s Single Window Interface for Facilitating Trade (SWIFT), Make in India, and relaxation of environmental norms for the chemical industry 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 above mentioned 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).