Silver lining! India turned net exporter of chemicals after 10 years in FY 20

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Published: July 21, 2020 7:30 AM

The data lend some credence to the claim that with right policy interventions, India’s chemicals sector can be a sustained driver of its merchandise exports.

The chemical and related products are clubbed together in 15 broad categories.The chemical and related products are clubbed together in 15 broad categories. (Representative image)

India turned a net exporter of chemicals and related products for the first time in at least a decade in FY20, according to the latest commerce ministry data.

While these are still early days to forecast a trend, the data come as a relief at a time when the country is battling the Covid-19 pandemic and the government is seeking self-sufficiency in this critical segment, especially in pharmaceuticals.

While exports of such products — including drug formulations, bulk drugs and drug intermediates, organic chemicals, agro chemicals and fertilisers — rose 3% year-on-year to $45 billion in FY20, imports stood at $44.3 billion, down 7.3%. In contrast, India’s overall goods exports contracted by 5.1% in FY20, while its imports shrank by 7.8%.

The chemical and related products are clubbed together in 15 broad categories.

The data lend some credence to the claim that with right policy interventions, India’s chemicals sector can be a sustained driver of its merchandise exports.

Importantly, over the past decade through FY20, exports of the chemicals and related products more than doubled from $20.8 billion in FY11 to $45 billion last fiscal, outperforming the overall goods exports that rose from $250 billion to just $313 billion during this period. Consequently, the share of the chemicals segment in the country’s merchandise exports, too, jumped from 8.3% in FY11 to 14.4% in FY20, having emerged as a key driver of export growth. Such imports rose up from $29.5 billion to $44.3 billion in the past decade.

Exports of drug formulations and biologicals remained the biggest driver of this growth, having witnessed a leap from $6.3 billion in FY11 to $15.9 billion in FY20. Organic chemical exports leaped from $3.8 billion to $8.3 billion during this period, while residual chemicals and allied products jumped from $2 billion to $5.6 billion. Agro chemicals exports climbed from $1.1 billion to $3.4 billion in the past decade. However, the outbound shipment of bulk drugs and intermediates remained almost stagnant in all these years — from $3.6 billion in FY11 to $3.9 billion last fiscal.

However, the dependence on imports, mainly of raw materials, is too strong in certain segments. For instance, the imports of organic chemicals and residual chemicals & allied products stood at $19.7 billion, or almost 45% of the total chemical and related item imports in FY20, having risen from $12 billion in FY11. China alone accounts for two-fifths of India’s organic chemical imports, which are mostly used in making finished products for both domestic consumption and exports.

R Uday Bhaskar, director-general at Pharmaceutical Export Promotion Council (Pharmexcil), said India’s pharma exports, the biggest category within the chemicals and related products segment, touched $20.58 billion in FY20, while such imports were to the tune of $6.25 billion. As much as 70% of the exports are typically formulations and 25% active pharmaceutical ingredients. Imports comprised finished drug formulation and APIs, amounting to about $3.5 billion and almost $3 billion, respectively, in FY20.

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