Page 29 - CII Artha Magazine

Sector in Focus

The Indian THE INDIAN CHEMICAL BETWEEN 2005 AND 30% of India’s 2.5+ million Growth Themes across billion revenue mark in the

the Indian Chemical sector
next decade, with attractive
graduates receiving a STEM
INDUSTRY HAS BEEN
2015, THE AVERAGE
(Science, Technology,
investment opportunities
Chemical Industry: GROWING AT A STEADY LABOR COST IN CHINA Engineering and We anticipate that as many as across all segments –
PACE AND IS EXPECTED
~30 Chemical companies in
CLIMBED BY ALMOST
Petrochemicals, Specialty
Mathematics) degree. The
TO GROW AT A CAGR OF
India could cross the USD 1
Chemicals and Agrochemicals.
Indian government has also
19–20% CAGR,
~6-7% TILL FY 2030,
shifted its focus towards skill
Poised for CONTRIBUTING NEARLY Key drivers for future Petrochemical Engineering & The vision
COMPARED TO INDIA’S
development with the
4-5% CAGR
establishment of institutions
USD 383 BILLION TO
like the Central Institute of
INDIA’S GDP
Transformative growth in the Indian Technology (CIPETs). Also, ~30 chemicals companies in India that cross
chemical sector
Chinese manufacturers
the USD 1 bn revenue mark
today are no longer
India’s Chemical sector is poised
competitive with their
for transformative growth in the
Indian counterparts in terms
Growth Themes
Growth coming decade. The industry has of labor costs. Between Bulk/Petrochemicals
overcome the COVID
2005 and 2015, the average
disruption and is on an
labor cost in China climbed
accelerated long-term growth
trajectory, enabled by four key
compared to India’s 4-5%
• Need for 15 new world-scale crackers to be added by 2035
drivers: by almost 19–20% CAGR, • Strong ~20-year growth window
CAGR. In fact, India has the • Self-sufficiency being the key theme of investments across
• Increasing Domestic lowest labor costs among petchem due to growing domestic demand
Consumption the top 6 chemical • Import Substitution for products such as styrene,
producers, presenting an polycarbonates, PVC, butylrubber etc
India’s per-capita chemical
Indian chemical industry is on consumption lags other opportunity for India to
emerge as the chemical
a rapid growth developed countries by a manufacturing hub of the
wide margin, and is expected
world.
Specialty Chemicals
trajectory on the global to increase significantly in • Improving regulatory • USD 60 Bn potential across specialty chemicals over next
the coming decade, driven by
India’s strong GDP growth, a
chemical landscape Glimpses of the Indian chemical growing middle class, and environment 10 years
Indian Chemical sector has seen growing urbanisation in the The Indian government, in • Under-penetration in key end markets presents
significant opportunities for investment
country.
Industry significant • China+1 strategy gaining its push towards • Strong opportunity to emerge as a global manufacturing
“Atmanirbhar Bharat” has
given the chemicals sector a
6 th growth across momentum high priority due to its hub by increasing exports due to shift in global supply
chains & adoption of ‘China+1 strategy’
Indian Chemical Sector (USD billion) the major Over the last 5 years, there strategic relevance. Various
Largest chemicals has been a shift of focus in favorable policies have been
producer in sub-sectors over announced and
the last 10 years manufacturing from China growth in the sector – 100% Agrochemicals
6-7 % USD 383 Bn the world global Chemicals implemented to drive the
80K+ 7-8% and developed nations to FDI allowed through • Regulations and growing farmer incomes leading to shift
newer, resilient destinations
Commercial such as India. Drivers for this automatic route, setting up in consumption basket = Opportunity in crop protection
and allied spaces
of Petrochemical and
chemical For shift include growing global
products petrochemicals trade tensions, tightening Chemical Investment Zones • Import substitution and new capacity addition to meet
environmental regulations, (PCPIR) and lower effective increasing demand from farms
tax rates being some of
~25% 10-12% rising labor costs in China, them. Government’s • Emergence of contract manufacturing due to lower labor
costs, skilled manpower availability and process
and the COVID-19
Contribution to pandemic. initiatives such as first-of-its engineering capabilities
kind GIS-enabled national
India’s GDP in For specialty land bank portal, improved
FY 2022 FY 2030P manufacturing chemicals • Skilled manpower availability As a result, significant CapEx estimated ~ INR 8-10 lakh
by 2025 and cost advantage logistics and multi-modal
Source: IBEF, Kearney Secondary Research connectivity have helped the crores is underway across the Indian chemical sector
Source: IBEF, Kearney Source: IBEF, Kearney India has a relative country jump 79 positions
abundance of skilled on Ease of Doing Business Source: Kearney analysis
manpower, with more than ranking in last 5 years.
Note: Excerpted from the recently CII-Kearney report titled ‘Mission Net-Zero: A Roadmap for the Indian Chemical Industry’ released in November 2022
28 ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY ANALYSIS, RESEARCH, THOUGHT LEADERSHIP & ADVOCACY 29
QUARTERLY JOURNAL OF ECONOMICS
QUARTERLY JOURNAL OF ECONOMICS
DECEMBER 2022 DECEMBER 2022