Targeted reforms encompassing a comprehensive range of fiscal and non-fiscal interventions will enable India to have a $1 trillion chemical sector and achieve a 12% global value chain (GVC) share by 2040 to become an international chemical powerhouse, NITI Aayog said in a report.
NITI Aayog has proposed a range of measures to boost the chemical sector, including an operational expenditure subsidy scheme, expedited environmental clearances, more free trade agreements, development of world-class chemical hubs, and improved access to technologies to promote self-sufficiency and innovation.
India’s 3.5% share in global chemical value chains and its chemical trade deficit at $31 billion in 2023, underscore its high dependence on imported feedstock and specialty chemicals.
The domestic chemicals market was valued at $220 billion in 2023 and is expected to grow to around $400 to 450 billion by 2030, with aspirations to reach about $850 to 1,000 billion by 2040, complemented by government support.
The global chemical industry is undergoing a major transformation, driven by shifting supply chains, demand for specialty and green chemicals, and heightened focus on innovation and sustainability. India’s chemical sector, while significant in size and GDP contribution, remains fragmented and constrained by infrastructure gaps, regulatory inefficiencies, and low R&D intensity.
India’s low investment in R&D, with only 0.7% of investment against the global average of 2.3%, hampers indigenous innovation in high-value chemicals, NITI Aayog said in a report titled “Chemical Industry: Powering India’s Participation in Global Value Chains”.
Regulatory delays, especially in environmental clearances, further stifle industrial agility. Additionally, the sector is hampered by a 30% shortfall in skilled professionals, particularly in emerging areas such as green chemistry, nanotechnology, and process safety, it said.
It suggested simplification and fast-tracking of the environment clearance process through setting up an audit committee to monitor timelines and compliance and publish periodic reports.
NITI report suggested incentivisation of incremental production of chemicals based on import bill, export potential, single source country dependence, end-market criticality etc. It suggested incentives on incremental sales to selected participants for a fixed number of years.