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Informist, Thursday, Jul. 3, 2025

 

NEW DELHI – A new NITI Aayog report has outlined a path for India to increase its share in the global chemical value chains. Targeted fiscal and non-fiscal interventions can help India have a $1 trillion chemical sector and achieve 12% share in global value chains by 2040, the report released Thursday said.

 

In the 'Chemical Industry: Powering India's participation in Global Value Chains' report, NITI Aayog said India's chemical sector faces several structural challenges that constrain its global competitiveness. One of the biggest issues for the sector is the reliance on imported feedstock, particularly from China, the report said.

 

Indian chemicals market consumption was around $220 billion in 2023, which is expected to rise to $400 billion–$450 billion by 2030 and up to $1 trillion by 2040, the report said. India is currently the world's sixth largest and Asia's third largest producer of chemicals, supplying essential raw materials to industries such as pharmaceuticals, textiles, automotive, and agriculture.

 

In 2023, India imported chemicals worth $75 billion compared with exports worth $44 billion, resulting in a trade deficit of around $31 billion for the sector. The deficit has risen over the years, and India had a net zero trade balance for the chemical sector in 2000, NITI Aayog said. "Rising imports of plastics, inorganics and chemicals have since caused a growing deficit over time."

 

China is the biggest import source for India's chemical industry. India imports around 35% of its chemicals from China. However, it exports only 5% of its chemicals to China.

 

Infrastructure gaps, outdated industrial clusters, and high logistics costs have created a cost disadvantage for India compared with other countries. "Compounding this, India's low investment in R&D (research and development), with only 0.7% of investment against the global average of 2.3%, hampers indigenous innovation in high-value chemicals," the report said. The sector also has a 30% shortfall in skilled professionals, particularly in emerging areas such as green chemistry, nanotechnology, and process safety, the report said.

 

The government's top think tank has suggested setting up world-class chemical hub to help raise India's share in the global value chains. NITI Aayog has also suggested development of existing port infrastructure, introduction of a operational expenditure subsidy scheme for chemicals, and quicker environmental clearances.

 

Additionally, India should negotiate a Free Trade Agreement that incorporate specific provisions for the chemicals industry, NITI Aayog said. Talent and skill upgradation is also essential for India to become a "global chemical powerhouse", the report said.

 

These policy interventions can create around 700,000 jobs by 2030, and raise Indian chemical manufacturing share in global value chains to 5-6% by the end of the decade from 3.0-3.5% in 2023, the report said. India can also see additional exports of up to $40 billion by 2030.  End

 

US$1 = INR 85.31

 

Reported by Shubham Rana

Edited by Akul Nishant Akhoury

 

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