4 February, 2025 17:04:34 IST 
The Indian chemical industry still remains a bright spot in an otherwise blighted landscape, though growth this year has been muted as compared to the past. This is partly due to slowing down of the overall economy and private consumption adversely impacted by inflation. The external environment remains challenging, and uncertainty looms as the threat of tariff and non-tariff barriers escalate in several parts of the world. Though these challenges are real and need short-term combat measures –by industry and policy makers – it is important to not lose sight of the fact that the industry has a bright outlook and will have to play a vital role if the dream of a Viksit Bharat (Developed India) @ 2047 – the centenary of Independence – is to be realised.
But there are several roadblocks that will have to be overcome of the targets are to be achieved. Some of the foremost relate to availability of skilled human resources (which is ironic given our population); improving the safety profile of the industry; and raising competitiveness through technology and policy interventions.
Essential and indispensable industry
First and foremost, it is important to recognise that the chemical industry is a vital one that cannot be wished away (as some would have). Itsproducts touch individuals and industries in multiple, indispensable ways, and this will only increase as India grows more prosperous and industrious. The industry is critical to the many new technologies deemed essential to sustainable living, including all forms of renewable energy (wind and solar power, in particular), and hydrogen-powered energy systems (think membranes, electrolytes).This not-so-obvious role of chemicals is well illustrated by the case of batteries that go into electric vehicles, which have taken the automotive industry by storm. Batteries are in essence chemical reactors in which chemical energy is converted into electrical energy during discharge (and vice versa during charging). Reports of fires (mostly in the two-wheelers) have brought focus on the quality of the batteries and the need for efficient heat dissipation systems, which are typically chemicals and polymers used in the form of conductive films, adhesive tapes, thermal pads, thermal mastics or even liquid products.
Growth in the Indian chemical market will also come from the upgradation of quality and performance even of products in conventional end-use segments. Discerning products – be they foods, textiles, personal care products, or electronics – will boost demand for differentiated chemicals that offer the performance boost.
In an Indian context, there are several growth drivers for this critical industry. Per capita consumption levels for most chemicals are currently way below global averages, let alone of advanced countries, and these can only go up. Sustainability pressures could act as a brake on some sectors– e.g., plastics – but even here the upward trend in demand is expected to be maintained, though perhaps at a slightly diminished pace. To give one perspective, China, with a comparable population to India’s, has a chemical industry which is 5x larger!
In short, demand growth is a given. The ability to scale up the supply side adequately will depend on several factors and three are discussed hereon.
Improving public perception & getting the talent
It is a lamentable fact that the relevance of the industry is not so well recognised by policy makers – with some exceptions – and is reflected in regulations put in place at national, state or even local levels. It is sad that the industry is largely viewed through the prism of the problems it creates, stemming from unsafe operations that adversely impacts human lives and/or the environment.
Public perception of the industry matters. If the industry is to grow to quadruple in size by 2047 to meet the demand expected, it will need greater societal acceptance than now. It is also key to attracting the talent the industry will need. It is a harsh reality that even today the chemical industry is not the first choice when it comes to career options. While this is the case in many other parts of the world, it is particularly problematic for India given that the industry here still has a long way to go before it can be said to punch at a scale commensurate to the size of the economy. A significant portion of engineers and scientists trained in chemical technologies and chemistry – especially from premier institutions – are lost to the industry as they switch careers to desk jobs such as marketing or finance or move out all together to other sectors, notably IT services. This has compelled the chemical industry– especially the mid-size ones – to draw technical human resources from tier-2 and tier-3 institutions, most of which have ‘quality’ issues that needs substantial investments (by companies hiring) in training and skill development.
The lack of ‘demand’ for courses in chemistry and chemical engineering has even driven some educational institutes to reduce batch intake or even shut down these courses.
Captains of industry must dwell on all of these aspects, for selfish reasons if not altruistic ones. Many companies have great growth ambitions, but lack the managerial bandwidth to match, and are often seen drawing in professionals past their retirement age to run operations. This is neither sustainable nor desirable, and every effort must be made to recruit, mentor and train a new crop of leaders to drive growth.
One has only to look to a peripheral industry – pharmaceuticals – which seems to have no problem finding the skillsets it needs – be they doctorates in chemistry or graduate chemical engineers, to envisage the possibilities here in the classical chemical industry. Key to talent acquisition and retention is to reward better – financially and through the offering of career growth options.
A safer,not just larger, industry
While India will need a chemical industry that is four times its present size in another 20 years or so, it cannot afford to have 4x the problems that exists. Improving the safety profile of the industry will be paramount. While the leading chemical companies – say the top-100 – have put in place the technical and human resources to ensure safe and reliable operations there are glaring gaps in a vast swathe of the industry that need to be tackled. Given India’s fragmented chemical industry, this is a formidable challenge that will take collective effort – by individual companies, industry associations, and policy makers.
In most small businesses, there are no dedicated Safety, Health and Environment (SHE) personnel, and regular training is not imparted to operators and supervisors onhazardous operations. In many, operations are managed by unskilled or semi-skilledpersons or persons with limited technical knowledge. Outsourcing critical operations to third-party contractors is not uncommon and adds another dimension to the problem. These limitations need to be overcome through appropriate policy interventions, fiscal support by financial institutions to aid modernisation, and hand-holding, especially by larger units that have much to share by way of technical knowhow. In many industries, lack of financial resources is not the primary hurdle. Much progress towards inculcating a culture of safety (process and behavioural) can be achieved by rephrasing the challenge and makingout the business case to invest in safety. In other words, the proposition needs to switch from discussing the cost of safety and incidents to discussing the value of safety-focus on business.
Clear zoning of chemical industry
While the chemical industry must be held accountable to do all that is practically feasible to improve its safety record, the fact remains that it will remain a hazardous one. While the industry first came up distant from population clusters in Maharashtra and Gujarat, that changedgradually and hemmed the industry, seriously amplifying risks. It is vital that India’s policy makers find suitable homes for chemicals manufacture, preferably in coastal areas for logistical and operational reasons, besides safety. State industrial development corporations and municipal bodies must ensure sanctity of this allotted space and prevent encroachments.
If the growth India needs does not happen in planned clusters there will be high price to pay in terms of impacts on the environment, safety, andcompetitiveness. The good news is that there is cognisance in government both of the need for such ‘chemical parks’ and the mistakes made in earlier attempts. While there are fewer contenders to set one up today, with the right policy interventions and fiscal support a few can be operationalised in the next three years. The commercial benefits that will stem from the sharing of resources and infrastructure will make up for at least some of the deficiencies that comes with manufacturing in India (high financial costs, high energy prices, etc.).
A PLI scheme will help
A Production Linked Incentive (PLI) scheme for chemicals, as introduced for several other industry segments (e.g., pharmaceuticals and some of their raw materials), will go some way in spurring investments by improving competitiveness in the early years of a project when it can be most vulnerable. This can be focused on speciality chemicals in which there is a high single country import dependence and for petrochemicals imported in high volumes. As encouragement to innovation, there is merit in introduction of a ‘First in India’ scheme, with, say, support to the extent of 5% of sales for the first two manufacturers to develop indigenous technology for ‘new’ products.
While sops will be welcomed by the industry, they are temporary, and new projects will have to eventually face the harsh winds of competition. They will be able to do so, provided their fundamentals are right.
Growth – a given; manufacturing will take a lot of doing
In summary, growth in chemical demand in India is a given. One may quibble about the growth rates (and they do matter), but one cannot go wrong by pegging it a tad above GDP growth rates. The aim should be to fulfil as much of this incremental demand with indigenous production, not imports, as has been the case for the last several years.
While the notion of self-reliance is a noble one, the realities of commerce in a globalised world cannot be dismissed. The advantage that comes from access to cheap feedstock (which, in most cases, are still petroleum based), and by building world-scale plants are considerable, and cannot be wished away. The worst mistake India’s planners can repeat is to support inappropriately sized, and poorly competitive plants for commodity chemicals that will be cobbled right from day one and constantly need artificial barriers (tariff and non-tariff) to stay in business. Besides being a wastage of resources, especially costly capital, they will also hinder growth of downstream industries wherein the competitiveness of Indian producers is best.
