MARKETS1 MIN READ

Chemical Sector in India, A Macro Perspective

Chemical sector can be further divided into:

Base Chemicals

Petrochemicals, man-made fibers, alkalies, organic & Inorganic chemicals.

Specialty Chemicals

Dyes, pigments, leather chemicals, construction, personal care.

Pharmaceuticals

Active pharmaceutical ingredients and formulations.

Agrochemicals

Insecticides, herbicides, fungicides, fertilizers.

Biotechnology

bio-pharma, bio-agri, other bio industrial products.

  • Total chemical production in india in 2015-2016 wat 9,884 MT of which Alkalis constituted 69%, organic chemicals 16%, inorganic chemicals 10% and 2-3% of dyestuffs and pigments.
  • India accounts for 16% of the worlds production of dyestuff and dye intermediates. The specialty chemicals market is expected to reach USD70bn by 2020.
  • India is the third largest producer of agrochemicals and the market for crop protection chemicals is projected to reach 7.5 billion USD by 2019 and register about 50% of those as exports.
  • Largest consumer of agrochemicals in India is Andhra Pradesh followed by Punjab and Madhya Pradesh.
  • India is the 3rd largest consumer in the world for polymers. The polymer market in India has grown at a CAGR of 23% between 2005 & 2015 to USD 1.3 billion.
  • The per capita consumption of polymer in India is 5.2kg as against china where it is 30kg. The high demand in the sector is because of the increased consumption in the packaging, automotive, construction sectors.
  • India exported 27 billion USD of chemicals in 2016 registering a growth rate of 4.7% in exports since 2013.But, india is a net importer of chemicals as it imported 39 billion USD worth of chemicals in 2016 registering an import growth rate of 5.6%.
  • Organic chemicals form the largest part of the imports and exports being roughly around 40%.
  • 100% FDI is permissible in the Indian chemical sector.
  • Share of chemical industry in total FDI inflow accounted to 4.1% in 2016, cumulative inflow from 2000 – 2016 is equal to 12.6 billion USD.

Some of the largest players in the Indian chemical industry include,

Gujarat Alkalies and Chemicals Ltd.

United Phosphorus Ltd

Tata Chemicals Ltd.

Gujarat Heavy Chemicals Ltd

Porter’s five forces model

Competitive rivalry Highly fragmented & intense rivalry, 100% FDI provides room for foreign competitors, dumping of chemicals at low prices.
Bargaining power of suppliers & customers Chemical companies are usually bound by long term contracts, niche chemical suppliers have some pricing power but largely customers have many alternate vendors.
Threat of New entrants Low, requirements of huge capital, know how & expertise
Substitute products Low, as specific chemicals seldom have too many substitutes

Source: IBEF (India Brand Equity Foundation)


Author

Vasudev Gupta


MD, Prosperity Wealth Management