Chemical industry has been one of those industries who have not only survived through the pandemic, but have grown instead. The chemical industry across the globe has grown leaps and bounds in the past couple of years. From the entire global chemical industry, currently, China’s share is approx. 25% and India’s share is limited to approx. 4%.
Compared to China’s approx. 18% share in the overall exports of specialty chemicals, India’s export contribution is mere 6-7% of total global exports of specialty chemicals
So, before making your decision to either invest or not invest in the Indian chemical industry in 2022, it is important for you to know about the current industry overview, factors in favour of this sector which will impact its performance in the future and the risk factors which may restrict or reduce its pace of growth and development.
Current Overview of Indian Chemical Industry
Based on the current performance and assumptions, India’s specialty chemicals industry is expected to continue to generate a 12% CAGR until CY25 – this is higher than the 6.4% CAGR expected for the global industry. The primary drivers for this increase are believed to be;
a) robust domestic consumption growth
b) rising import substitution
c) strong growth in exports (due to rising adoption of the ‘China plus one’ strategy by global MNCs).
Factors In Favour Of The Indian Chemical Industry
Major chemical players have been continuously increasing their scale of operations, which is visible from recent capex announcements by many of them. This has been improving Indian chemical players’ competitiveness when compared to the Chinese players.
India is emerging as a fast-growing specialty chemicals hub on a rise in its competitiveness. This change will be led by the availability of low-cost labour along with the world-wide initiative of being non-China dependant.
Moreover, the constant rise in the number of fully-integrated, intermediate chemicals suppliers, increasing number of Indian companies in the list of major global players along with lower regulatory costs, rising availability of low-cost feedstock for Indian players and India’s strong IP protection and improving R&D expertise will enable India to become the key beneficiary of the rise of the global chemical industry.
From the total raw-material required by Indian chemicals companies, 35% is procured from outside India. Further, the companies which produce pharmaceutical intermediates have been obtaining raw material mainly from China.
So, there is procurement risk considering the current global situation on account of disruptions caused by Covid-19.
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Is This The Right Time To Invest
The Indian Chemical industry is believed to have a significant role in making India a US $5 trillion economy. It is believed to contribute around US $300 billion to the GDP by 2025. Currently, the chemical industry in India is growing with CAGR of 9.3% and is expected to attract investments of Rs. 8 lakh crores by 2025. This gives all the positive signs in the favour of investing with a long-term horizon.