The Growth of Indian Chemical Industry

From economy and strength to the security and well being of the nation, all aspects technically rest on a chemical foundation. With an aim to leverage greater manufacturing competitiveness, the industry is inching towards greater technological development. This has led to a share of Asia in the global chemical industry increasing from 31% in 1999 to 45% in 2009. With Asia’s growing contribution to the global chemical industry, India emerges as one of the focus destinations for chemical companies worldwide. With a clear aim to increase the contribution to the industrial growth worldwide, we can see two scenarios emerging for the future-the first one being the base case scenario, which targets growth with the current initiatives of industry and government. However, the industry could aspire to grow much more and its growth potential is limited only by its aspirations. In such an optimistic scenario, high end–use demand based on increasing per capita consumption, improved export competitiveness and resultant growth impact for each sub-sector of the chemical industry could lead to an amazing overall growth rate. This has a potential for further upside in the future considering India’s increasing competitiveness in manufacturing. The draft manufacturing policy recently approved by the Cabinet targets increasing the share of manufacturing in GDP to at least 25% by 2025 (from current 16%). It aims to create 100 million additional jobs through the creation of National Investment and Manufacturing Zones (NIMZs) as mega investment regions, equipped with world-class infrastructure. These zones will enjoy fast-track clearances from the environment ministry and state pollution boards, special policy regimes, tax concessions, and more favorable labor laws. Investments in manufacturing in the chemical sector are absolutely essential to ensure the growth of the Indian chemical industry.

There are some initiatives that the government can take to ensure accelerated growth of the chemical industry.

  1. Support the new technology:

Subsidies and tax benefits can be provided to promote investments in R&D and green technology. A technology upgradation fund can be set up for chemicals.

  1. Develop India’s chemical inventory

A chemical inventory is a listing of industrial chemicals manufactured in or imported by, a country created from information submitted to government authorities by manufacturers, processors, users, and/or importers. Such an inventory can allow authorities to maintain an updated overview of chemicals marketed in their country, reveal whether substance manufactured is used within a country or exported therefore the applicability of new research knowledge to the country and identify risk zones to facilitate the setting of risk reduction priorities. A dedicated cell of 5 to 10 competent scientists and chemical engineers may be set up to lead the development of India’s chemical inventory along with establishing the relevant funding mechanism.

  1. Improve infrastructure: A better infrastructure and proper power supply is the need of the hour to encourage the industrial growth of chemicals. Infrastructure is inadequate with respect to the safe transportation of products as well as proper goods storage and exports.

Significant investments are needed in roads, railways, waterways, ports, warehouses etc. to support the overall industrial growth in India. Various levers could be explored to provide adequate infrastructure to the chemical industry

There is some measure that industry can take to ensure strong industrial growth.

  1. Invest locally with scale and size matching global norms and adopt cutting-edge technology (developed or acquired). Fragmented nature of the industry makes it difficult for companies to optimize operational costs, realize economies of scale and adopt the latest technologies, making them uncompetitive globally. The industry should actively move towards investing in new capacities with scale and size matching global standards to achieve world scale of plants and reap economies of scale and adopting cutting-edge technologies
  2. Interact with regulatory/ industry bodies The industry must engage constructively with regulatory bodies for jointly developing effective approaches for addressing the challenges and needs of the industry. Companies should also co-operate with the regulators by adopting requisite standards and following industry rules and regulations:
  3. Establish a targeted innovation platform, invest more in R&D Product innovations for meeting local needs to rely heavily on the chemical industry for inputs and support. Chemical industry must work in close collaboration with end-use industries to help innovate products suited to Indian conditions. The areas for strengthening R&D in chemical industry include improvements in catalysis, manufacturing process, reduction in the cost of production, application development and design of new products relevant to the Indian market needs e.g. water management, low-cost vehicles, biofuels etc.

Growth in chemical industry would result in the growth of associated industries too. Some of the closed plants, having outlived their natural lives, will have to be built afresh to keep pace with technology and environmental considerations. Others will be closed because of the consideration of economic viability assessment and consolidation. Yet another driver would be the relocation of capacities to places closer to markets or raw material sources or clusters providing cost or strategic advantages,

The Indian chemical industry has the expertise, knowledge, people, and technology to aspiring towards targeted growth and development. There are several opportunities and new hopes for the Indian chemical industry. The industry needs to capitalize on these opportunities to gear up for the challenges ahead.

 

– Jovina Vaswani

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