Context

NITI Aayog has released a report titled “Chemical Industry: Powering India’s Participation in Global Value Chains,” which assesses the current status, challenges, and future roadmap for India’s chemical sector.

Overview of the Report

The report provides a comprehensive analysis of India’s chemical industry—its role in the global value chain (GVC), sector-wise potential, and strategic measures required to position India as a key global hub.

India’s Chemical Industry at a Glance

• Global Position: 6th largest globally, 3rd in Asia
• GVC Share: 3.5%
• Market Size (2023): $220+ billion
• GDP Contribution: ~7%
• Key Consumer Sectors: Agriculture, pharmaceuticals, textiles, construction, and automotive
• Future Projections:
  • $400–450 billion by 2030
  • $1 trillion by 2040

Key Market Segments

1. Petrochemicals
   • Derived from petroleum/natural gas
   • Largest segment: $65–75 billion
   • Persistent demand-supply gap
2. Specialty Chemicals
   • High-value, low-volume (e.g., dyes, agrochemicals, coatings)
   • ~$40–45 billion in consumption
   • 50% of total chemical exports
3. Inorganic Chemicals
   • Includes salts, metals, minerals
   • Used in construction, electronics, water treatment
   • ~$15–20 billion market
4. Non-Core Segments
   • Fertilizers, pharmaceuticals, medical devices, personal care
   • ~$90 billion in total consumption

Major Challenges

• Import Dependence: $75 billion in imports vs $44 billion in exports (2023); 30–35% imports from China
• Low R&D Investment: Just 0.7% vs global average of 2.3%
• Outdated Infrastructure: Industrial clusters and logistics lag behind global peers
• Regulatory Bottlenecks: Lengthy environmental clearances and fragmented approvals
• Talent Shortage: 30% gap in skilled workforce, especially in green chemistry and process safety
• Limited Diversification: Overdependence on bulk chemicals

Strategic Vision: Doubling India’s GVC Share by 2030

Growth Drivers

• Urbanization and rising domestic demand
• Post-COVID supply chain realignments
• India as a trusted global partner

Seven Strategic Interventions

1. World-Class Chemical Hubs
   • Central-level empowered committee and Chemical Fund
   • Develop shared infrastructure
   • Revamp existing hubs (Dahej, Paradip, Vizag, Cuddalore)
2. Port Infrastructure Enhancement
   • Dedicated chemical committees at ports
   • Develop 8 high-potential coastal chemical clusters
3. Opex Subsidy Scheme
   • Incentives for increased production based on strategic criteria
   • Targeted subsidies on incremental sales over fixed years
4. Technology & Innovation Boost
   • R&D fund disbursement through interface agency (DCPC + DST)
   • Collaborations with MNCs and academia
5. Simplified Environmental Clearances
   • Fast-tracked approvals via autonomous EAC
   • “Deemed EC” after 270 days
   • Merge EAC and EIAA for faster processing
6. Targeted FTAs
   • Negotiate tariff exemptions and secure critical feedstocks
   • Simplify FTA compliance for industry access
7. Skill Development and Talent Pipeline
   • Expand ITIs and set up training institutes
   • Industry-aligned curricula and PPP-based apprenticeships
   • Faculty training in polymers, petrochemicals, safety, etc.

Global Benchmark: China’s Model

• Grew from 6% global share (2000) to 33–35% (2023)
• Key drivers: infrastructure, R&D, FDI, policy stability
• Used SOEs and strategic overcapacity to build scale
• India can draw lessons while tailoring them to its federal structure

Way Forward: Building a $1 Trillion Industry

With the right policy execution and global positioning, India’s chemical sector can:

• Become a global manufacturing hub
• Achieve strategic self-reliance
• Lead in green and innovation-driven chemical production

Outcome: Strengthening India’s role in global value chains and contributing significantly to the $5 trillion economy goal.

Source: PIB