The chemical industry in India is positioned to capitalize on near-term opportunities. How private players map their priorities could shape the future of the industry and contribute to trade performance.
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
The chemical industry in India is positioned to capitalize on near-term opportunities. How private players map their priorities could shape the future of the industry and contribute to trade performance.
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.
Key factors leading to growth
Six trends are shaping the global chemical industry. While they spell uncertainty in the global context, they could open near-term opportunities in India.
- Several global oil and gas majors are turning their sights on downstream chemical opportunities. This may increase the focus on petrochemicals in India, and higher investment in the sector could ease feedstock challenges and boost self-sufficiency.
- The structure of China’s chemical industry is changing due to stricter environmental norms, tighter financing, and consolidation. While these shifts may benefit select large players in the long run, they could cause uncertainty for international players that source chemicals from China. That could create opportunities for India’s chemical companies in certain value chains and segments, especially in the short term.
- Trade conflicts have erupted around the world, especially among China, the United States, and Western Europe. These have led to shifts in global supply chains, affecting bilateral trade between China and the United States,9 with possible repercussions for other economies. Large chemical markets that remain accessible in this scenario could present opportunities for chemical companies in India.
- Industry-wide, there seems to be a move toward prioritization of core businesses and consolidation on a greater scale, often through big-ticket mergers and acquisitions. For players in India, the scale will matter even more, as it could help to fortify their competitive advantage.
- Digital technology has established itself as a lever to enhance efficiency and productivity. Many companies worldwide are embracing digital’s potential; India’s companies could also tap into this opportunity to expand their profit margins.
- Sustainability is becoming an imperative, not a buzzword, with various stakeholders placing a premium on it. Chemical companies could prioritize environmental sustainability to protect long-term shareholder value while continuing to comply with local regulations.
Future Outlook
Despite the current pandemic situation, the Indian chemical industry has numerous opportunities considering the supply chain disruption in China and trade conflict among the US, Europe, and China. Anti-pollution measures in China will also create opportunities for the Indian chemical industry in specific segments.
Additional support, in terms of fiscal incentives, such as tax breaks and special incentives through PCPIRs or SEZs to encourage downstream units will enhance the production and development of the industry. The dedicated integrated manufacturing hubs under Petroleum, Chemicals, and Petrochemicals Investment Regions (PCPIR) policy to attract an investment of Rs. 20 lakh crore (US$ 276.46 billion) by 2035.
To bring about structural changes in the working of the domestic chemical industry, future investments should not only focus on transportation of fuels such as petrol and diesel, but also on crude-to-chemicals complexes or refineries set up to cater to the production of chemicals.