Addressing the 59th annual general meeting of ICMA held here on Friday, Subramaniam said improved rural demand, higher agricutural production in 1998-99 were the main reasons. Besides, increased competition in manufactured goods and lower prices, demand of housing and a possible revival of the capital market the first quarter of 1999-2000, also aided sonsupmtion levels leading to a buoyancy in most chemical prices.

He further said overall, there is a pick up in demand in most products due to the optimistic outlook on the economy. The economy seems to have come out of the sluggishness and most chemical companies, except caustic soda and hydrogen peroxides, have shown good results in the first quarter of 1999-2000. This is especially true for agrochemicals, fertilisers polymers and organic chemicals, he added. Oneof the heartening factors in 1998-99 was the growth in demand for polymers which was around 15 per cent. Though this was lower than 17 per cent seen in 1997-98, this was far better than the growth being seen in many other countries and regions, he said.

After a good performance in 1994-95, 1995-96, Indian chemical industry saw a deep decline in profitability from 1996-97 to 1998-99 following low international prices, South east asian crisis, high cost of inputs and steep reduction in import duty.

He stated among the major industrial sector, analysts said that chemicals have been the hit severely by the financial and economic crisis in Asia which resulted in reduced demand and low prices.

The rush in capacities during 1994-95, 1995-96 resulted in large surplusses in some of the industries like caustic soda. Those industries with high energy consumption and large domestic surpluses suffered severely due to steep drop in international prices. Many caustic soda plants across the country have closed down asthey have become unviable, he reminded.

The situation in down-stream petro chemicals was also no different. The high interest rates, cost of power, inefficient infrastructure was a severe load on the Indian chemical industry as the reform process had only centred on drop in import duties without in any way mitigating the weaknesses that plagued chemical industry, Subramaniam added.