INTRODUCTION

The chemical industry of India is a major contributor to the Indian economy, contributing
7% of the country's Gross Domestic Product (GDP). India's chemical industry ranks as sixth
largest in world, and third in Asia. The value of the chemical industry in India was estimated
at 100 billion dollars in 2019.The chemical industry of India generates employment for five
million people.

The Indian chemical industry mainly produces basic types of chemicals as well as knowledge
type chemicals and specialty type chemicals as of 2018. In India, Gujarat was the largest state
contributor to the chemical industry of India in 2018. India also produces products related
to petrochemicals, fertilizers, paints, varnishes, glass, perfumes, toiletries, pharmaceutic
als, etc.

The India chemical industry is divided into six sub-segments. These sub-segments are Basic
Organic Chemicals, Specialty Chemicals, Chlor-alkali, Pesticides, Dyestuff, and alcohol-based
chemicals. India is a major producer of basic organic chemicals.

History
In India, the Council of Scientific and Industrial Research (CSIR) was established in 1942
with the aim of providing scientific and industrial research to maximize the scientific,
economic, and environmental benefits to the people of India.

The Indian Chemical Manufacture association, now called Indian Chemical Association (ICC)
was founded in 1938 in by P. C. Ray, Rajmitra B. D. Amin and other Industries to promote
the national chemical industry of India.

In India, the first pharmaceutical company set up was Bengal Chemicals and
Pharmaceutical. Bengal Chemicals and Pharmaceutical was set up by P. C Ray, professor
of chemistry at Calcutta University. After 9 years of settlement of this company, one more
company called Alembic Chemical works at Baroda (Now as Vadodara) in Gujarat was set
up.

Before World War II, foreign companies had the domain in the drug industry of India.
After World War II, foreign company domain in drugs decreased and more Indian drug
companies were established. During this time, the Indian government established five drug
companies. The two of them are Hindustan Antibiotics Limited and Indian Drugs and
Pharmaceutical companies.

After India got independence from the British Raj in 1947, India established many units
of basic chemicals, dyes, textiles and fertilizers. In 1964, a downstream plant was established
in Mumbai.

In the 1980s and 1990s, the petroleum industry of India had grown faster with the development
of the gas cracker, along with related downstream industries for polymers, synthetic
fibres, aromatic and other chemicals. In early 1980, the IPCL had established a plant-based on
a cracker in Gujarat and Maharashtra.

India has been suppressed by inadequate supply and high import duties in the petroleum
industry, which led to private industry entry into the petroleum industry. Reliance
industries have set up many parts
in PatalGanga (Maharashtra), Jamnagar (Gujarat), Hazira (Gujarat). This led to an
increased role of Reliance industries in the petroleum industry. This has led to the entry of
Reliance industries into the polyester business, such as purified terephthalic acid, and
polyethylene terephthalate resin. These new materials are used to make polyester
fibre, bottle and filamentation.

Overall Working of the sector

India’s chemical story is one of outperformance and promise. A consistent value creator, the
chemical industry remains an attractive hub of opportunities, even in an environment of global
uncertainty. Worldwide trends affecting the global chemical industry could lead to near-term
opportunities for chemical companies in India. How chemical players prioritize and tap this
value-creating potential could shape the future of the industry in India as well as the country’s
trade performance.

India is an attractive hub for chemical companies. The chemical industry is a global
outperformer regarding total returns to shareholders (TRS), and this has resulted in high
expectations for sustained, continual growth. The macro perspective on India indicates that
while the short-term outlook is challenging, the country’s long-term-growth story remains
positive.
Until 2014, TRS growth was primarily underpinned by an increase in top line. Over the last
five years, the triple effect of margin expansion, an increase in multiples, and continued
revenue growth has raised TRS (exhibit).

Between 2006 and 2019, the compound annual growth rate (CAGR) in TRS for India’s
chemical companies was 15 percent—a figure much higher than the global chemical-industry
return, with a CAGR of 8 percent, and the overall global equity market, with a CAGR of 6
percent. Even between 2016 and 2019, when India’s economy faced headwinds, the chemical
industry maintained a CAGR of 17 percent

CHALLENGES FACED BY CHEMICAL INDUSTRY IN

INDIA

1.SHORTAGE OF RAW MATERIALS:

The raw materials or feedstock used in the organic, as well as the inorganic chemical
industry, are not quickly accessible in the market. The chief feedstock like naphtha and
natural gas are accessible at a very eminent cost in India as contrasted to other nations like
the Middle East, China, and other South East Asian countries. This shortage of feedstock
makes India uncompetitive in the worldwide chemical market.

2. COMFORT IN AFFORDABLE IMPORT:

One of the prominent challenges confronted by the Indian chemical industry is the expertise
in the availability of inexpensive chemicals through import. The tax and other entry barriers
on the import of several chemicals have been waived off by the Indian government. This has
directed to an improvement in the import of various chemicals accessible in the global market
at a much lower price.

3. REMOTE LOCATION AND POOR INFRASTRUCTURAL

FACILITIES:
One of the prominent challenges confronted by the Indian chemical industry is the expertise
in the availability of inexpensive chemicals through import. The tax and other entry barriers
on the import of several chemicals have been waived off by the Indian government. This has
directed to an improvement in the import of various chemicals accessible in the global market
at a much lower price.

4. COMPLICATED REGULATORY PROBLEMS AND HIGH

TAX RATES:
The massive duty tax inflicted on a lot of raw materials exceeds the tax imposed on the
ready-made products. This disappoints the Chemical Industry of India from the
manufacturing sector, more chemicals due to the high cost of raw materials and supports the
import of similar chemicals due to the negligible taxes

S.W.O.T ANALYSIS

STRENGTH:-

• Consumption driven growth

• Rising income
• Competitive labour
• Manufacturing base
• Vibrant downstream industries
• Quality human resources

WEAKNESSES:-

• High feedstock cost

• High energy and finance cost
• Poor infrastructure
• High incidence of taxes

OPPORTUNITES:-

• Large domestic market

• Low per capita consumption

• Increasing investment in downstream

 • “Make in India” campaign
• Improved infrastructure investment

THREATS:-

• Low cost production in gulf & China

• FTA’s with various countries
• Price volatility of crude oil
• Strong environmental regulations
• REACH regulations

MAJOR PLAYERS IN CHEMICAL INDUSTRY

SR.NO. NAME OF COMPANY MARKET CAP Rs IN Cr.

1). PIDILITE INDUSTRIES 108452
2). AARTI INDUSTRIES 29935
3). ATUL LTD 26268
4). DEEPAK NITRITE 24350
5). GODREJ INDUSTRIES 19205

GDP CONTRIBUTION
The Chemical Industry is one of India’s oldest industries. As a matter of fact, it contributes to
a lot of other sectors by supplying products and raw materials. The industry will have a market
value of 300 billion USD by 2025. Moreover, the size of the Indian Chemical Industry is USD
108.4 billion. Also, the Chemical Industry in India is fast growing and diversifying,
contributing approximately 3 per cent of the GDP. It is one of the third largest industries in
Asia and occupies the twelfth place in the world in terms of its size. From 2014 to 2015, India’s
chemical industry was valued at US$137 billion, with overall chemical and chemical product
sales of US$147 billion. Bulk chemicals, petrochemicals, and specialty chemicals accounted
for 65% of total sales. Despite its apparently large size and significant contribution to gross
domestic product (GDP), the Indian chemical industry accounts for 3% of the worldwide
chemical market, valued at US$4.3 trillion. Excluding pharmaceutical products, it ranks 14th
in chemical exports and eighth in imports.

Global perspective on chemical sector

Covering more than 80,000 commercial products, India’s chemical industry is extremely
diversified and can be broadly classified into bulk chemicals, specialty chemicals,
agrochemicals, petrochemicals, polymers and fertilisers.

Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan
and China. India accounts for ~16% of the world production of dyestuffs and dye intermediates.
Indian colorants industry has emerged as a key player with a global market share of ~15%. The
country’s chemicals industry is de-licensed, except for few hazardous chemicals. India holds a
strong position in exports and imports of chemicals at a global level and ranks 14 th in exports
and 8th in imports at global level (excluding pharmaceuticals).
India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, enables
it to benefit on economies of scale.

Market Size
The Indian chemicals industry stood at US$ 178 billion in 2019 and is expected to reach US$
304 billion by 2025 registering a CAGR of 9.3%. The demand for chemicals is expected to
expand by 9% per annum by 2025. The chemical industry is expected to contribute US$ 300
billion to India’s GDP by 2025.

An investment of Rs. 8 lakh crore (US$ 107.38 billion) is estimated in the Indian chemicals
and petrochemicals sector by 2025.

In October 2020, production of key chemicals was 880,569 MT and petrochemicals were
1,808,997 MT.

The specialty chemicals constitute 22% of the total chemicals and petrochemicals market in
India. The demand for specialty chemicals is expected to rise at a 12% CAGR in 2019-22. The
petrochemicals demand is expected to record a 7.5% CAGR between 2019 and 2023, with
polymer demand increasing at 8%. The Indian agrochemicals market is expected to register an
8% CAGR to reach US$ 3.7 billion by FY22 and US$ 4.7 billion by FY25.

Covering more than 80,000 commercial products, India’s chemical industry is extremely
diversified and can be broadly classified into bulk chemicals, specialty chemicals,
agrochemicals, petrochemicals, polymers and fertilisers.
Globally, India is the fourth-largest producer of agrochemicals after the United States, Japan
and China. India accounts for ~16% of the world production of dyestuffs and dye intermediates.
Indian colorants industry has emerged as a key player with a global market share of ~15%. The
country’s chemicals industry is de-licensed, except for few hazardous chemicals. India holds a
strong position in exports and imports of chemicals at a global level and ranks 14th in exports
and 8th in imports at global level (excluding pharmaceuticals).
India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, enables
it to benefit on economies of scale.

SUMMARY
The Chemical Industry is one of India’s oldest industries. The industry will have a market value
of 300 billion USD by 2025. It contributes 2.11% to the economy’s GDP. The India's chemical
industry is the third-largest in Asia. The exports are very strong and almost 34% of the
country’s earnings actually come from the chemical industry. In India, the Council of Scientific
and Industrial Research played a significant role in maximizing the scientific, economic, and
environmental benefits to the people of India. Environment becomes crucial in chemical
industry. The market is shifting to a more environmentally aware R&D process. The sector
allows 100% FDI and this makes the markets open for investments. India also has a large pool
of quality human resource in chemical sector. The Chemical Industry in India is a good
investment opportunity as it has large growth potential. Overall, the Chemical Industry in India
is a good investment opportunity as it has large growth potential.