This report profiles India’s chemicals industry, discussing market trends through 2013 and outlook for 2014 and beyond. The report also highlights leading players in the sector including Tata Chemicals Ltd, UPL Ltd and Pidilite Industries Ltd.
The Indian chemical industry has played an important role in the development of the Indian economy. The industry includes basic chemicals and chemical products, petrochemicals, agrochemicals, dyes, paints and varnishes, synthetic fibers and industrial gases. Chemicals and chemical products industry is among the 22 industry groups in the manufacturing sector tracked by the index of industrial production and is the second largest sector after basic metals.
Industrial production in India saw a period of extended slowdown during FY14. However, the chemical and chemical products sector emerged resilient even amidst the slowdown. The sector recorded a double digit growth even when most of the manufacturing industries were struggling to stay profitable. Consistent rise in demand for chemicals and chemical products in the country was the primary reason for the growth of this sector. Most of the players in the sector rode this wave and recorded growth in both revenues as well profitability. Rising fuel costs and increase in imported raw material costs (due to rupee depreciation) was a concern but was off-set by the higher revenue growth.
However, domestic production was insufficient to meet the demand and as a result a large proportion of the requirement was met through imports. There has been a rapid increase in trade deficit in the sector during the last five years despite having a substantial export share. This has prompted the government to take steps to stimulate indigenous manufacturing of chemicals in the country.
Going forward, we expect the sector to continue on its growth track backed by a growing construction sector, a large textile sector, and a growing need for agrochemicals. The introduction of National Chemical Policy and other such government incentives will further add to the growth of this sector.
Chemicals and chemical products are one of the major industry groups tracked by the index of industrial production. It constitutes about 10.1% of the industrial output represented by IIP and grew at a CAGR of 2.1% during fiscal years 2007-12.
In the period 2008-13, chemical exports recorded a double-digit annual growth rate of 18%. As of FY13, organic chemicals accounted for 44% of Indian chemical exports, followed by plastic products with a contribution of 19%.
As domestic chemical production was insufficient to meet the huge demand, large numbers of chemical products were imported to meet the domestic requirements. Chemical imports accounted for 7.6% of the country’s total imports as of FY13.
In 9MFY14, the chemical manufacturing index grew by 10.3% y/y while the general index declined by 0.1% y/y. Thus, the segment not only outperformed its historic growth rates but also outperformed the overall Indian manufacturing sector during this period.