Overview of the Indian Chemicals Industry
The Indian chemicals industry is projected to experience a revenue growth of 6-8 per cent in FY26, driven by ongoing expansion in domestic end-user industries. Despite this, growth is challenged by geopolitical uncertainties.
Growth Trends
- FY25 Growth: The industry observed an 8 per cent growth, supported by a low base and stable domestic demand.
- MSMEs Contribution: Micro, small, and medium enterprises (MSMEs) constitute 25-30 per cent of the industry's revenue. Their growth is expected to moderate to 4-6 per cent in FY26, down from 5-7 per cent the previous year.
Challenges and Concerns
- Global Trade Concerns: Excess supply in the global market could lead to pricing pressures, particularly affecting MSMEs' export margins.
- Government Measures: Anti-dumping duties and minimum import prices on certain chemicals from the Middle East and China aim to protect local manufacturers. However, this will more significantly impact the margins of downstream MSMEs than larger players.
Opportunities and Market Dynamics
- Specialty Chemicals: Indian manufacturers have a potential opening to increase their share of global imports to the US due to higher tariffs on Chinese products. This opportunity is likely short-term as US companies are expected to enhance their manufacturing capabilities.
- Domestic MSMEs: There are approximately 300,000 MSMEs in the chemical industry, mainly in specialty chemicals such as agrochemicals, dyes, pigments, and surfactants. Gujarat and Maharashtra host around 30 per cent of these due to favorable conditions.
Import and Production Dynamics
- Import Trends: FY24 saw a surge in the import of specialty chemicals, including agrochemicals and surfactants, largely due to cheap Chinese imports and inventory clearance.
- Future Projections: Imports are expected to decline in FY25 as domestic production increases and global supply chains stabilize.
