By contributing around 3% to India’s GDP the Indian Chemical Industry is one of the most important contributors to the country’s economic development. In terms of domestic production and exports, the Indian chemical sector is ranked 3rd in Asia and 7th in the world. The Industry is divided into several categories like petrochemical, agrochemical, construction chemical, wherein every segment holds great potential for foreign and local chemical companies, placing the Chemical Industry as a favorable investment destination among investors.
The agrochemical sector plays an important role in the India Chemical Industry and in general by ensuring food and nutrition quality and security. The industry, which is expected to touch $6.3 billion by 2020, is dominated by international players who are increasingly expanding their footprint in the market. According to the Department of Industrial Policy and Promotion (DIPP), the Indian fertilizer sector has attracted FDI equity inflow of $565 million from April 2000 to December 2016. German Chemical company BASF is one of the leading vendors on the agrochemicals market. To develop and establish innovative technologies for modern crop protection solutions for farmers, the company has entered into a partnership with the Indian agrochemical company PI Industries. Both companies aim to enhance their market participation in the crop segment and agrochemical market in general.
By allocating around $7.8 billion to be spent for the revival of four major fertilizer plants and to set up a gas pipeline network that connects East India to the National Gas Grid, the Indian Government is set to drive the Agrochemical Industry. The new fertilizer projects will increase the annual production capacity by 7.5 million tonnes. This will make the country more self-reliant as India sources its annual domestic fertilizer demand of around 32 million tonnes mainly from imports. Ananth Kumar, Minister for Chemicals & Fertilizers said, “Financial allocations and the ground level work would start in 2017 and the five plants would become fully functional by 2020-21.”
Due to increasing infrastructure development activities and the growing urbanization, the Indian construction chemical market has seen significant growth over the last few years. Accounting for only 0.4% of the total construction spends, the sector has the potential to reach 1% which is the norm in developed economies. According to a recently published report, the construction chemical market is expected to grow at a CAGR of 17.2% during 2014 and 2020 to reach $1.89 billion by 2020. Construction chemicals are usually added with construction materials in order to improve its workability, performance, and durability. Several policies and incentives formulated by the Indian Government to promote the concept of the “Green Revolution” have led to a growing preference for the utilization of ready-mix concretes. The market shows considerable potential for foreign companies to enter the Indian market. For instance, the US-based Gomaco Corporation has recently associated with the Indian company Schwing Stetter India and is targeting $10 million in sales during its first year in India for its concrete paving products.
The Indian Government has recognized the entire Indian Chemical Industry as a key growth element of the economy. With several new policies and projects, the Government tries to further boost the Chemical Industry and is maintaining the sector as a high growth driver in the economy. The Goods and Service Tax (GST) regime that the Government targets to roll out from the 1st of July will be beneficial for several industries including the Chemical Industry. By capping GST rates at 18%-20% the GST regime will have a strong positive impact on the chemical sector as it will reduce the administrative burden of multiple taxes.
There is an increasing number of global chemical companies considering India as a preferred destination for innovative chemical equipment and technologies. With the recent trends in the Indian Chemical Industry and the positive outlook of foreign investors, the chemical sector will soon be more self-reliant and less dependent on imports.
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