Chemicals

Chemicals

The Indian chemical industry remains a key contributor to the country’s overall economic growth and has strong linkages with other industries such as textiles, paper, paints and varnishes, leather etc.As per the estimates of the Department of Chemicals and Petrochemicals, Government of India, the size of the Indian chemical industry was Rs. 1.6 lakh crore in FY08, which accounted for approximately 3% of India’s GDP.The share of the industry in India’s total exports and imports was estimated to be 14% and 9% respectively in FY08.

The sector is divided into three segments, namely basic chemicals, specialty chemicals and the high end knowledge segment.

As compared to global standards, the Indian chemical industry is still fragmented with a mix of large and small scale firms operating within the sector. The fiscal concessions granted by the Government to the small sector in the last decade led to the establishment of a large number of small scale units in the industry. While basic chemicals continues to remain the largest segment, with a market value of Rs.91,800 crore, significant investments in Research and Development (R&D) has led to a gradual shift in composition towards the speciality and knowledge segments. In FY08, total investments in the Indian chemicals sector were estimated to be Rs.2.8 lakh crore. The market size of the speciality chemicals segment and the knowledge segment are estimated to be Rs.42,200 crore and Rs.28,800 crore respectively during the same year.

The Basic chemicals segment is the oldest in the Indian chemical industry; it is divided into sub-segments including petrochemicals, inorganic chemicals, organic chemicals, fertilizers and pesticides, among others. The speciality chemicals segment is mainly comprised of a large number of small manufacturing units. This segment enjoys significant cost advantage, given that companies are small and their costs of production are low. Greater focus on R&D activities by the Government has helped this sub-segment witness high growth in the last decade. The knowledge chemicals sub-segment covers areas like pharmaceuticals, agrochemicals and biotechnology. As was the case with specialty chemicals, the knowledge chemicals sub-segment has also witnessed strong growth since the Government of India has encouraged R&D activities.

The SMEs operating in this segment remained key contributors towards development of the sector as well as exports. Some advantages that SMEs in the chemical industry continue to have over the larger players are highlighted below:

  • Low investment requirements
  • Operational flexibility
  • Location wise mobility
  • Capacities to develop appropriate indigenous technology
  • Import substitution


Over the last decade, the Indian chemical industry has diversified significantly. Today, India has a strong presence in the production of basic organic & inorganic chemicals, pesticides, paints, dyestuffs and intermediates, petrochemicals, fine & specialty chemicals as well as cosmetic & toiletry segments. Use of advanced technology, continuous research & development, development of domestic capacity to reduce dependence on imports of raw materials are likely to remain key success factors for Indian chemical industry going forward. Besides, safety, health and environment protection issues are becoming increasingly important today. Moreover, as more Indian chemical manufacturers expand beyond national boundaries, the need to achieve global standards by improving productivity through better raw material utilisation, bi-product reduction & use, energy reduction & conservation, effluent management, water management, up-gradation of plant & equipment and skill development remains imperative.

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