According to the latest report by Tata Strategic Management Group (TSMG), the Indian chemicals market has the potential to grow to a size of US$190 billion by FY18 from the current US$ 118 billion.

The report was created by TSMG as knowledge and strategic partner for FICCI's 8th India Chem International Conference 2014. The report titled "Spurting the Growth of the Indian Chemical Industry" was released by Ananth Kumar Minister of Chemicals & Fertilizers, Government of India.

Today, at a domestic market size of ~US$ 118 billion the Indian industry accounts for approximately three percent of the global chemical market. It is highly diversified with more than 80,000 chemicals and currently accounts for 15 percent of India's manufacturing GDP which makes it very crucial for the economic development of the country. The report details the demand-supply scenario over the next five years and also the key growth drivers.

Announcing the findings of the 2014 report, Manish Panchal, Practice Head - Chemicals, Energy & SCM, Tata Strategic Management Group said, "The Indian chemical industry is an integral component of the Indian economy and has the potential to grow to a size of US$190 billion by FY 18 through a series of concerted efforts. This aspirational growth scenario places a greater emphasis on growth in the specialty and pharmaceutical segments. In order to realize the true potential, Industry, Government and Regulatory bodies need to work in tandem".

The current low per capita consumption across industries and segments and strong growth outlook for the key end use are the key growth drivers for this industry. To meet the increasing demand either the local production will have to ramp up or it will be met by imports.

In the past decade, India didn't tap its manufacturing potential to the fullest due to complex regulatory environment and "crisis of confidence" for consumers and investors which led to a surge in the chemical imports.

Net imports have grown at ~20 percent between FY09 and FY13 whereas in the same period the domestic output has grown by approximately four percent. However, going forward, new Government's push through ‘Make in India' campaign could become the next big manufacturing growth story.

The report highlights that Indian chemical industry is facing critical challenges like availability, allocation and pricing of key feedstocks and lack of adequate infrastructure, all of which are leading to demand outpacing supply in the country's chemical industry.

Adoption of alternate feedstocks, investing in R&D, achieving scale through collaboration are some of the key levers available for overcoming this imbalance. A collaborative approach by the Industry, Government & Regulatory bodies is the need of the hour to realize full potential of the Indian chemical industry.   

Charu Kapoor, Principal - Chemicals Practice added "India must work on promoting the use of alternate feedstocks like coal to chemical, shale gas, biomass, ethanol and Oleochemicals to sustain the growth of chemical industry."

Tata Strategic Management Group has identified the key imperatives for industry players, Government and Regulatory bodies in the report. For example, companies need to realign their portfolios and focus on product innovation to introduce new and complex products. Government should promote the cluster based approach to enhance the competitiveness of domestic manufacturing for both domestic and multinationals. Together, they should work on realizing the true potential of the Indian chemical industry.
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