Specialty Chemicals: An Emerging Mega-trend

The $25 billion Indian specialty chemicals industry has delivered 13% growth over the past five years, led by domestic consumption, according to industry reports. Experts are betting on specialty chemicals as one of the next mega-trends, and the industry is expected to reach $70 billion by 2020. The industry has grown at a 30% CAGR over FY13-15 to $2.67 billion. Going forward, lower commodity prices will provide the much needed support to margins, and rising demand will facilitate volume growth.

The Government’s ‘Make in India’ program has enhanced the competitiveness of the Chemicals sector in the country, by delicensing manufacturing for most chemicals, and permitting 100% FDI.The upcoming Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) as well as the Plastic Park will further provide state-of-the-art infrastructure.

The Government has been encouraging R&D in India. It has also reduced the list of reserved chemical items for production in the small scale sector, thereby facilitating investments in technology upgradation and modernization.

Global firms are gradually facing the heat of compliance, cost and capacity issues in other markets, and are thus looking to outsource their manufacturing processes to India.

The structural shift towards Indian specialty chemical players is supported by the country being more compliant to environmental norms, with stronger IPR protection and a rich pool of knowledge workers. This opens a window of opportunities for Indian firms over the next 5-10 years, impelling them towards capacity-building, which will help them grow further.

Specialty and knowledge chemicals are characterized by a high degree of research, intensity of intellectual capital, and deployment of skilled manpower.

Government support in the form of a robust patent framework, the presence of appropriate regulations to protect intellectual capital, tax benefits and subsidies to promote investments in R&D, as well as green technologies, is crucial for growth.

Furthermore, setting up of specialized universities and vocational training institutes to develop a strong skills base, removing redundancy associated with multiple regulatory bodies, and simplifying registration approval procedures, can help in establishing India as a strong global manufacturing hub.

R Mukundan

Chairman, CII Institute of Quality Advisory Council, and

MD, Tata Chemicals Ltd

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