Chemicals Industry

 

Overview

The chemicals industry in India is the worlds eighth largest and Asia’s third largest chemicals producer in terms of volume. India accounts for approximately 16% of the world production of dyestuff and dye intermediates.  India is also the fourth largest global producer of agro-chemicals. Total production of the Indian chemicals industry stood at 21.2 Million Tonnes during 2014-15. Production of polymers is around 6.53 Million Tonnes with imports of around 3.73 Million Tonnes during 2014-15. Besides this, the chemicals industry in India is the most diversified, covering more than 70000 commercial products. The estimated market size of the industry stands at a mammoth, USD 100 billion as of 2015.

Domestic and Global Outlook

The Indian chemical industry is one of the oldest and long established industries that have supported India’s growth and economic development. It is a part of the basic goods industry and therefore is a critical input for agricultural and industrial development. Being one of the most diversified industries in India, it includes products such as petrochemicals, fertilisers, paints, gases, pharmaceuticals, dyes, etc. It also provides the feedstock to many downstream industries such as finished drugs, dyestuffs, paper, synthetic rubber, plastics, polyester, paints, pesticides, fertilisers and detergent.

Over the years, the industry has been evolving with a shift towards product innovation, brand building and environmental friendliness. Besides, customer focus is gaining significance in the industry. In order to encourage investment in the sector, the government is continuously contracting the list of reserved chemical items for production in the small-scale sector, thereby facilitating investment in technology upgrades and modernisation. Also, India exports about 50% of its current production of agro-chemicals and exports are likely to remain a key component of the industry which presents itself as a great investment opportunity.

 

The government has also given a boost to R&D in the sector, where private sponsored research programs are given a weighted tax deduction is given under Section 35 (2AA) of the Income Tax Act. A weighted deduction of 200% is granted to companies for any sums paid to a national laboratory, university or institute of technology, for specified persons with a specific direction, provided the sum is used for scientific research within a programme approved by the prescribed authority. The outlook for the industry therefore looks bright, with exceptional industry performance and several government incentives that are working towards attracting for investment in the sector.

 

The ‘Make in India’ initiative is one of the biggest pushes given to the industry. Under the initiative-

Implementation of a strategy for sourcing and allocation of feedstock.

Development of an innovation roadmap for chemicals sector and setting up of R&D fund under Public Private Partnership model.

Focus on green and sustainable technologies and reducing the environmental impact of the sector.

Augmenting existing testing centres to act as certifying agencies for testing plastic products and raw materials to meet BIS standards.

Future Potential

Besides the central government, there are several state governments that give companies incentives for setting up chemical plants in the country. Incentives are in areas like subsidised 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. Certain export incentives that include, export promotion capital goods scheme, duty drawback scheme and merchandise export from India Scheme are also big plusses for this industry. These incentives therefore, bring out the opportunities that the industry presents and further bringing to light the possibilities and potential for investment.

 

Some of the other important features of India that draw attention to its potential are a large population, huge domestic market dependence on agriculture and strong export demand, which are also key drivers of the industry currently. A global shift towards Asia as the world’s chemicals manufacturing hub is another important fact to consider while considering this industry. Per capita consumption of chemicals in India is lower as compared to western countries, which creates immense scope for new investments as the saturation point is yet to be touched.

 

Other important features that emphasize the industry’s potential include the specialty chemicals market, which has witnessed a growth of 14% in the last five years; the market size is expected to reach USD 70 Billion by 2020. India is currently the world’s third largest consumer of polymers and growth in plastic demand will drive up consumption further. Growth drivers include a growing construction industry and adoption of advanced coating, ceiling and polymer-based reinforcing material in construction as well as plastics, paints and coatings for the automotive sector.

What this report contains:

  • A detailed overview of the industry

  • Structure of the industry from both, domestic and international perspectives

  • Related industries that this industry has inter-dependencies with and their understanding

  • Detailed analysis of industry segments in terms of the value and depth of corresponding market

  • Analysis & insights about the elements and critical success factors of this industry using strategic models

  • A forecast on the state of this industry in 2021, predicting the growth and movement patterns for 2016 - 2021

  • Our professional analysis on the future of the industry based on strategic actions adopted by major industry participants analysis and their key strategic initiatives

  • Quantitative estimates and forecasts of the growth prospects of the industry using revenue and financial forecasting models and Valuations of major players of the market

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