NITI Aayog recently released ‘Chemical Industry: Powering India’s Participation in Global Value Chains’ report providing an extensive analysis of India’s chemical sector.
- It highlights that fiscal and non-fiscal interventions will lead to a USD 1 trillion chemical sector and achieve 12% GVC share by 2040.
- Currently India’s share in global chemical value chains is 3.5%. (India is 6th largest chemicals producer globally)
Challenges of Chemical Industry
- Heavy reliance on imported feedstock: This contributed to a USD 31 billion trade deficit in 2023, stemming from limited domestic backward integration.
- Low investment in R&D: 0.7% of investment against the global average of 2.3%, hampers indigenous innovation in high-value chemicals.
- Skill Shortage: 30% shortfall in skilled professionals.
- Other Challenges: Infrastructure limitations, Logistics inefficiencies, Complex regulatory frameworks etc.
Way Ahead
- Targeted government support such as Viability Gap Funding (VGF) to catalyze investments.
- Establish world-class chemicals hubs in India and Introduce an opex (Operational Expenditure) subsidy for chemicals with high import dependence, export potential, and end-market criticality
- Fast-track environmental clearance and Securing FTAs to support Industry growth.