Catalyzing growth: India's chemicals and petrochemicals drive growth

India's domestic demand, global supply shifts, and sustainability drive growth opportunities for the chemicals and petrochemicals (CPC) sector.

In brief

• India's CPC industry aims to double its global share by 2030, driven by both domestic demand and export growth.
• The chemical sector attracted US$844 million in FDI for FY24¹, buoyed by policies like the PLI and RoDTEP.
• There is a rising demand for specialty chemicals and push for bioplastics and biodegradables as industries adopt sustainable practices and decarbonization
• Major petrochemical players have made capex commitments to expand capacity and R&D initiatives. 

India is expected to be the world’s third-largest economy by FY2030-31. Its annual growth rate is about 6.7%. The manufacturing sector, including chemicals, is recovering well after COVID-19 and attracting a lot of foreign investment. This growth is due to economic reforms, infrastructure development, and increased integration into global supply chains.

The Indian CPC sector plays a vital role in driving the country’s economic growth, as it is the cornerstone of various industries, from agriculture to pharmaceuticals and from automotives to electronics and construction. Domestic demand and strategic self-sufficiency efforts have led to the CPC industry experiencing a surge in market size. 

In the global specialty chemicals industry, given the varying geopolitical tensions, there are several real-time opportunities for India's chemical sector to contribute effectively to the Global Value Chain (GVC) given its strengths of low manufacturing and labor costs, adoption of sustainable practices, etc. India's policy reforms and incentive schemes, including petrochemical industry Production Linked Incentive (PLI) scheme, Remission of Duties and Taxes on Exported Products (RoDTEP), Make in India, Aatmanirbhar Bharat and initiatives like Petroleum, Chemicals, and Petrochemical Investment Region (PCPIRs) and Plastic Parks, skilled talent, infrastructure growth in terms of significant investment in road, rail and ports connectivity and availability of green energy, are making the country an attractive destination for manufacturing investments. 

New avenues for CPC sector

The domestic scope for the CPC sector is also increasing. India's per capita consumption of chemical products remains significantly lower than that of developed countries, highlighting potential for growth. The chemical industry, currently valued at around US$250 billion, aims to grow to US$300 billion by 2025 and US$383 billion by 2030, doubling its global industry share to 6%. By 2040, it targets a market size of US$1 trillion, supported by a CAGR of 9.3%. The sector expands alongside the nation’s economic growth, leveraging cross-industry linkages, skilled talent, and a strong focus on R&D and innovation.

The demand for CPC in India is being significantly driven by an influx of domestic demand from both linked industries and direct consumers, with strong growth anticipated in construction, textiles, automotive, agriculture, pharmaceuticals and electronics sectors. The Contract Research and Manufacturing Services (CRAMS) sector is expanding, with Indian firms becoming key players due to cost efficiency and intellectual property safeguards.

The PLI scheme is expected to generate robust demand from downstream and emerging sectors, while government initiatives to support plastic recycling and sustainability are reshaping the industry. India’s focus on sustainable practices, such as decarbonization and leveraging digital technologies, would drive growth in specialty chemicals and bioplastics. 

The Indian government’s initiatives to boost the chemical industry include plans to set up petrochemical complexes around all the country's 22 refineries.

Trade deficit in the area is an investment potential in India's petrochemical sector, which is attracting investment in new world-scale petrochemicals complexes. Major petrochemical players have earmarked significant capital expenditure for the next seven years towards capacity expansion and R&D. The highest CAPEX spend is of US$8 billion with planned capacity addition of 5.5 MTPA on plastics such as PTA, PET and PVC²s

Future of India's chemical and petrochemical industry

India’s commitment to green technology and net zero emissions by 2070 underscores the focus of the CPC industry on the role of sustainability. However, challenges for the CPC sector in India in terms of import of raw materials, logistics costs, inadequate R&D infrastructure and competition necessitate a strategic roadmap emphasizing technology and research.

India must streamline regulatory processes and develop robust infrastructure. By adopting global benchmarks, India can establish integrated chemical hubs, offering world-class infrastructure and fostering innovation. Additional incentives could further stimulate growth, making India an attractive destination for chemical manufacturing investments and enhancing its global competitiveness.