Indian chemical sector continues be massively influenced by government policies
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Indian chemical sector continues to be massively influenced by government policies

11:33 AM, 10th February 2017
Indian chemical sector policies
A representative image of chemical laboratory glassware. (File photo)

Valued at over $150 billion, the chemical sector remains a key contributor to the Indian economy. In 2015, it accounted for nearly 14 percent of India’s exports, contributing 7 percent to the total GDP. According to United Nations Industrial Development Organisation (UNIDO), in terms of value at constant year 2,000 prices, a chemical sector in India ranks 3rd in Asia and 6th in globally. These numbers are an indicator of how closely India’s economic growth is tied to the performance of its chemical sector.

The Government of India has been supportive of the chemical sector. It has enacted favourable policies and regulations to support the growth of this industry. Moreover, the Government of India plans to set up over 70 Central Institute of Plastic Engineering and Development (CIPET) centres, petrochemical complexes in all 16 refineries along with national chemical safety sections and National Bureau of Corrosion Control centres. In the backdrop of steady demand from end-use industries and favourable government policies, it is expected that the chemical industry will continue to grow at high single-digit growth rates in the next couple of years. However, it is important to factor in the impact of recent groundbreaking policies, such as GST and demonetisation on the chemical sector.

While both these reforms are expected to be beneficial for the industry in the long-term, they have had a massive short-term impact.Abrupt declaration of demonetisation has trickle-down growth and development in the agriculture sector, which, in turn, has adversely impacted the chemical sector.Further, before the benefits of GST are fully realised, the growth of the chemical sector will be significantly stymied.

While GST and demonetisation can have an adverse impact in the short-term, other government initiatives, such as Skill India, Digital India and Make in India have bolstered growth and development in the chemical sector of India. In fact, the government is striving to feature India among global manufacturing hubs and set up various petrochemical complexes around 22 refineries that are run by public sector enterprises.

Research and Development

The future growth of the chemical industry depends on to a large extent on the investment in R&D. As the needs of end-use industries continue to evolve, the chemical industry is hard pressed to come up with innovative solutions that are not only more efficient but also comply with the local and international regulations. The chemical industry is partnering with colleges and universities to develop the next generation of innovative, eco-friendly chemicals. Investment in R&D in India’s chemical sector remain steady although they are not at the same scale as Europe and the US. Still, the present government is putting in the effort to explore emerging opportunities in this sector.

The 9th biennial edition of ‘India CHEM 2016’ held in Mumbai was specifically dedicated to capitalising on the available opportunities, such as using Naphtha and its derivatives. Discussions also centred around exploring innovative methods of energy and water conservation to deal with operational inefficiency and water availability issues.

Business Prospects

 In a bid to wear the crown of success, companies across various domains have no other option than to invest in research and development. This is especially true for companies operating in automobiles as they are dependent on chemicals that enable them to manufacture technically-equipped products with enhanced performance. While 70 percent of chemicals are used by chemical industries themselves, scarcity in oil & gas resources is influencing vendors to substitute oil & gas resources with other minerals or chemicals.

Further, companies that are operating in the medical sector are reliant on chemical industries as well for production of various medications. Medications, particularly for dermal care, majorly depend on chemicals. For instance, application of solution with a tinge of potassium permanganate on infected areas is usually prescribed by dermatologists.

The range of products such as deodorants, perfumes, body care lotions, various cosmetic products is highly dependent on chemicals during the production process. Apart from cosmetics, manufacture of weapons and tools for defence sector further requires a use of chemicals. Apart from a few aforementioned, there are various industries that are highly dependent on innumerable chemicals for production or development purposes.

Apart from chemical conservation and heritage management, chemicals are further used in entertainment sector for broadcasting movies with 3D or 2D effects. Adding to list, various correction surgeries or plastic surgeries procedure includes an application of chemicals. Aside from the rest, chemicals are highly used for a production of decors, electrical appliances for events and festivals. Chemicals are particularly used for a production of crackers in event of Diwali. They are also used for a production of hues of colours for application in Holi.

With innumerable policies and programmes rolled out by a government of India such as ‘Digital India,’ ‘Make in India’ in parallel to an upsurge in an application of chemicals in various domains, a growth of the chemical industry is expected to escalate in coming years. Furthermore, as an integral part of the economy, rapid growth and development in chemical sector are expected to bolster the growth of the economy. As per capita income of consumption in India is relatively low, it brings forth the immense scope of opportunities and scope for investment. Overall, a chemical sector of India is much ado about good reasons to invest and bolstering the economy in every way.

Source: Future Market Insights

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