The Indian chemical industry is expanding at a faster rate than most other industries. The industry is expected to have growth of 11 to 12 percent from 2021 to 2027 and 7 to 10 percent from 2027 to 40, tripling its worldwide market share by 2040, according to a report by the global market research firm McKinsey & Company. Many things, like increasing demand at home, shifting tastes in consumer goods, new dynamics in the supply chain, and so on, are likely to propel this expansion. Talking about India’s specialty chemical market has been expanding at a rapid pace in recent years. Media reports indicate that the Indian specialty chemical industry would expand from an initial 2020 valuation of $32.01 billion, with a projected CAGR of 7.6 percent from 2021 to 2026.
Several reasons have contributed to this expansion, including government regulations that are supportive of the industry’s growth and the rising demand for specialized chemicals in end-use industries including medicines, agrochemicals, and cosmetics. Multinational corporations have shown interest in the Indian specialty chemicals market due to the country’s advantageous location, plentiful raw materials, and cheap labor costs. This industry is anticipated to play a significant role in India’s future economic growth, thanks to the government’s efforts to establish a strong manufacturing ecosystem, which includes programs like the ‘Make in India’ campaign.
Possibilities Prompted by Global Outsourcing Initiatives
Seizing the Chance for Export Within Categories
The Road Blocks
Possibilities Prompted by Global Outsourcing Initiatives
Organizations based in Asia are crucial to the worldwide range of specialty chemicals. The manufacture of specialty chemicals underwent a structural movement away from the European Union and North America and towards Asia as a consequence of fast industrialization in Asian countries. When it comes to the production and export of specialty chemicals, China has risen to the top of the Asian pack and has become an international powerhouse. Nevertheless, the chemical industry in China saw a period of transition as a result of the country’s economic reforms, which included changes to worker prices and environmental regulations. Significant supply-chain disruptions in the country’s chemical industry were also caused by the relocation of hazardous manufacturing plants to designated industrial parks. Several specialty chemical companies rethought their approach to business and manufacturing site location as a result of these issues. To broaden their business or move their operations entirely, a few of these companies that had operations in China investigated other potential sites.
If given the chance, India might become a major player in the global market for specialized chemicals. As a result of stricter pollution controls in China, the gap in operational costs between the two countries has narrowed. In addition, many multinational corporations are shifting production to low-cost, high-tech nations like India as part of the “China plus one” offshore strategy. India offers a lot of benefits, including low-cost operations, feedstock availability, trained labor, a vast coastline and navigable rivers for ease of trade, beneficial government regulations, a lot of chance to substitute imported goods, and strong protection for intellectual property. It has been crucial to recruit international specialized chemicals producers to the country through macroeconomic factors that lead to a healthy environment and improve the ease of doing business. The nation’s continued investment in core research and development competency, size, and the ability to provide products at lower costs (via efficiency measures) puts it in a good position to increase its worldwide market share.
Seizing the Chance for Export Within Categories
Almost four times as valuable as India’s exports, 18% of the world’s specialty chemicals come from China. The gap between India and China in export capacity could narrow, though, if India proves to be a good alternative market for specialized chemical companies. In comparison to China, India’s export figures in certain sub-segments are quite low.
To make up for it, India could be able to increase its export capacity by increasing production in these sub-segments. The acceleration of expansion ambitions can also be achieved if global chemical leaders reassess their buying from China to India. To further investigate the export share potential of electronics, food additives, rubber, flavors, and perfumes, it is necessary to increase the productivity of chemicals serving these industries.
The Road Blocks
The most pressing problem that required fixing right away is the fact that the raw material—widely regarded as the most important component of this enterprise—is not readily available in India. The raw material price is on the rise compared to the competitive market, which is a related factor to the above-mentioned challenge.
The producers are susceptible to worldwide price changes and supply disruptions because, as said earlier, the raw material is not readily available. As a result, they must depend on importing these commodities.
Another factor that adds pain to the agony is a constant need for innovation and technological progress on a worldwide scale, and Indian specialty chemical companies are no exception. While huge players may not be too concerned, smaller ones, operating on a shoestring budget, definitely feel the pinch.
Pratyusha Srivastava
