The chemical and petrochemical industry in India is very crucial to the industrial development of the nation considering the fact that it is a very dynamic and heterogeneous sector that is very important to the economic structure of the country. This sector consists of a huge variety of products and industries, be it basic chemicals and petrochemicals, or fertilizers, and pesticides, or pharmaceuticals, and paints and varnishes; this sector is an important component in agriculture, health care, building and construction, textile, auto, and consumer products industries.
India’s chemical industry is on an upward growth path, driven by increasing domestic consumption, developing technologies, and active participation of both public and private sectors, import substitution, enhancement of productive capacity and more computerized and green practices.
Growth and Economic Contributions
The chemical and petrochemical industries have augmented the industrial output and the economic growth of the country. As per National Accounts Statistics (NAS) 2022 of Ministry of Statistics and Programme Implementation, an estimate of 1.42% was the Gross Value Added (GVA) for the sector, including all other sectors at constant prices for the year 2020-21. This has registered a substantial growth from 1.22% in the previous fiscal period 2019-20 indicating the growing contribution of the sector to the national economy.
With respect to its contribution to manufacturing GVA, this has been caused by the increase in production capacities as well as in domestic consumption. A chemical industry is one of the segments of the manufacturing sector of the country which has recorded great progress due to inward investments and exportation. The chemical exporters in India have propelled the growth of exports from this country which recorded USD 29 billion chemical exports in 2021 as noted by the Ministry of Chemicals and Fertilizers.
The Index of Industrial Production – Chemicals & Chemical Products (IIP) remained stable within the bounds of 116 – 121 over the period of 2017-18 to 2021-22 which is impressive given the increase of global economies’ strains such as the supply chain shocks, the coronavirus, and changing costs of raw materials.
Production Trends
Major Chemicals
The Indian chemical industry has been growing over the years at a healthy pace especially for some major chemical sectors such as alkali chemicals, inorganic chemicals, and organic chemicals. These bring together several other industries providing inputs for further processing.
The chemical industry growth rates from 2017-18 to 2021-22 should also be noted with emphasis. Over the period the production of major chemicals had a Compound Annual Growth Rate (CAGR) of 3.58%. Alkali chemicals being that they account for very high percentage of total chemical production is important in products which use glass, textiles, paper, among others. Likewise organic compounds such as acids and fertilizers are growth enablers because they are used largely in agriculture and industries that manufacture products.
In the financial year 2022-23 (up to September 2022), the production of major chemicals attained the value of 6,487 thou metric tons. However given the consistent supply across various markets the outlook of production is likely higher over the years.
Petrochemicals
Another key segment of the country’s industrial framework is petrochemicals. They are present in all segments of the economy including packaging, textiles, and building construction. Through to consumer electronics and automobiles. The reach of petrochemicals in the form of polymers, synthetic fibers and rubber is so vast. That such products become crucial components in the manufacture of industrial and household products.
The production of major petrochemicals has shown a Compound Annual Growth Rate (CAGR) of 4.91%, from 2017-18 to 2021-22. Mainly due to the increasing demand from end user industries. In the first half of the financial year 2022-23, a production of 20,083 thousand metric tons was reported. Highlighting the rising dependence on petrochemical products.
Apart from this, India is also increasing the refining and petrochemical production capacity of the country which is important for catering to the local market and cut the imports. Korean companies such as Reliance Industries, Indian Oil Corporation, and ONGC Petro Additions Limited have already established petrochemical facilities in the country thus improving the global standing of the nation
Key Sectors within the Industry
Basic Chemicals: As the main ingredient of any chemical sector, basic chemicals also find application as raw materials in numerous industrial processes. A caustic soda, for instance, sulfuric acid, and methanol are required for the production of textiles, plastics, pharmaceuticals, fertilizers and so on.
Fertilizers: Fertilizers play an important role in cycles of agriculture in India sustaining food needs of the rising population. India is a country with high nitrogenous fertilizers geopolitical appetite. It is currently working on improvement of the situation concerning reliance on imports developing local production.
Plastics and Synthetic Rubber: These are also some of derivative finished products of petrochemicals such as plastics and synthetic rubber. It is useful in various industries such as automotive, packaging and construction. Due to the government’s emphasis on infrastructure and residential development. The consumption of these materials is most likely to increase considerable.
Pesticides: Pesticides safeguard the crops from pests and diseases and as such are vital in enhancing agricultural output. Agrochemicals are among India’s highest produced and exported products due to their global demand for sustainable agricultural methods.
Paints and Varnishes: The paints and varnishes segment is driven by growth in construction, infrastructure, and consumer goods sectors. The country faces an upsurge the demand for decorative paints in the urban areas and rural regions of the country.
Economic Impact
The impact of the chemical and petrochemical industry on the Indian economy is complex. As it helps in industrial production, provides jobs and earns foreign currency by way of exports. Its sub-sector, with over 80,000 commercially produced products. It plays a significant role in the support of other sectors especially pharmaceuticals, textiles, packaged consumer goods and automobile.
Also, the sector has large employment span providing both direct and indirect employment throughout the value chain. It extraction and processing of raw materials or distribution and sales. The job creating potential is even more impressive when one considers the allied industries. Such as logistics, packaging and research and development which are emerging.
Moreover, the government’s “Make in India” campaign has further propelled investments in the sector. Urging local and foreign entities to set up or scale their operations in the country. The chemical and petrochemical industry in India is on the rise gradually in terms of research. Development and very encouraging new technologies to improve efficiency and sustainability.
Challenges and Opportunities
Notwithstanding the prospects it has, the chemical and petrochemical industry is besieged by :
- Availability of Raw Materials: India’s import dependence is very high when it comes to the provision of essential raw materials. It especially for petrochemicals such as crude oil and natural gases. Therefore the cost of production is easily affected with changes in the global oil enjoyed by the countries.
- Environmental Constraints: There are extreme environmental constraints to the companies in this sector with regards to the levels of emissions such as waste management and water usage to mention a few. While this is limitation – it is also a chance to develop new products based on green chemistry and green manufacturing technologies.
- Supply Chain Disruptions: The chemical industry in India was also affected due to the pandemic as it faced intermittent lapses in supplies. It is very clear indication of the need for sourcing from several suppliers and producing in the country. Itself to strengthen the domestic supply chain network.
Nonetheless, this particular space has a lot of room for development:
- Innovation in ‘Green’ Chemicals: A new sector which includes manufacturing and usage of non-cost ineffective environmental materials is emerging. The focus is on sectors like crops, clothing, and wrappings. Many players are looking for green chemistry techniques such as those that use renewable sources of plastics, recover waste. Replace them with inks made from non-recyclable plastics to produce edible containers.
- Capacity Expansion: With the excise and developmental policies in place. The enhanced refining and the petrochemical capacity expansion in India will decrease imports and improve exports. Forecasting the country as the world’s foremost hub of the chemical industry.
Conclusion
In crease in domestic demand, strategic investments and the upsurge of innovation. Sustainability in the country is being the menace growth in India’s chemical and petrochemical industry for years to come. As the sector matures, it will be important in determining the future of industrial development in India. It enhancing economic activities in the country and optimizing the potential of India in the global chemical market. Provided there is appropriate policy frames and investment in fresh technologies. This industry is going to shake the world very soon.