The Ascent of India’s Chemical Sector

India overtaking Japan as the fourth largest economy brings to the fore its dynamism as the fastest growing major economy in the world. At the heart of this industrial advancement lies the chemical sector – a critical industry that is emerging as one of the key players driving the nation’s ambition for self-reliance and global competitiveness. The sector’s strong track record as an early adopter of technology, coupled with significant investments in innovation and sustainability, is particularly evident in the transformation taking place through its chemical landscape.

The government’s prioritisation of strategic investments in infrastructure, digitization and manufacturing has been crucial in catalysing growth not just broadly, but with specific impact on the chemical industry. Adoption of Artificial Intelligence (AI) is a prime example that has revolutionized chemical manufacturing through enhanced process optimisation, predictive maintenance for critical equipment, and innovative approaches to waste reduction, thereby boosting efficiency and safety. The spirit of indigenous problem-solving and execution excellence is also mirrored in the chemical sector’s push towards advanced manufacturing and Research & Development (R&D).

This progress is also increasingly viewed through a holistic lens, where sustainable economic development is not just a goal but a fundamental driver of growth. For the chemical sector, often under scrutiny for its environmental impact, embracing sustainability is crucial. It involves adopting greener processes, managing waste responsibly, and developing eco-friendly products, thereby creating long-term value for stakeholders and strengthening India’s position as a responsible global player.

Growing Stronger Post COVID Era

The Indian chemical market has shown remarkable signs of recovery since the COVID era. It has remained resilient and demonstrated strong growth despite global market disruptions and international policy changes. With demand steadily increasing, the sector is further solidifying the growth momentum even as other regions face ongoing economic pressures. India is now the sixth largest chemical producer in the world and third largest in Asia, contributing a significant 7 per cent to the GDP of the country. Following the 3.4 per cent growth in 2024, the market is projected to grow by 3.5 per cent in 2025.

On the other hand, Europe is facing critical challenges in its chemical industry due to high energy costs and supply chain issues. As India enjoys the advantage of being one of the most cost-effective producers, global chemical companies view it as an attractive investment destination. This factor will be a key determinant of the nation’s long-term growth.

Specialty Chemicals and Strategic Global Diversification

A key driver of the Indian chemical sector’s ascent is the rapidly expanding market for specialty chemicals. The robust growth of this segment is outpacing the global growth. This surge is fuelled by advancements in important end-user industries such as packaging, automotive, nutraceuticals, and the thriving electric vehicle (EV) market – all demanding customised, high-performance materials. To meet this evolving demand, leading Indian chemical companies are innovating and scaling up.

To capitalise on the surge in demand for specialty chemicals, Indian chemical companies are increasingly pursuing strategic global diversification. The EV sector, for example, is growing rapidly in North America and Europe, while demand for foundational chemicals, like soda ash, is expected to rise in Asia and Africa as global capacity expands. Industry leaders are adjusting to these shifts.

Innovation and Sustainability Fuel Long-Term Growth

Sustainability and innovation investments remain the key to unlocking India’s long-term growth potential in chemicals. The understanding is clear that a company’s growth hinges on the collective advancements made as an industry, making collaborative R&D efforts vital. India has made remarkable progress in this direction, with increased focus on emerging technologies such as battery innovation, nanotechnology, and sustainable chemistries, including the development of bio-based surfactants. With the growing focus on green chemistry, sustainability is no longer optional, but essential for enhancing competitive edge and overall growth.

Vision

In a competitive landscape, strong customer engagement is paramount for sustained growth. Leading chemical companies understand that building long-term client relationships and encouraging meaningful engagement with diverse audiences is crucial. Sustainability initiatives also play a crucial role in building customer trust and creating lasting value.

With a strong foundation in core chemicals and a growing footprint in high-value specialty chemicals, the industry is well-positioned to lead through innovation, sustainability, and customer-centric strategies. This forward momentum directly supports India’s ambitious economic vision.

The goal for Indian industry leaders is to prepare a roadmap for a US$4 trillion economy that has the potential to become a US$10 trillion economy in less than a decade. Policy makers and Business leaders, who are trusted with the responsibility to drive our rapid economic ascent, should be able to see a clear picture of the urgency and opportunities facing India.

For the Indian chemical industry, currently valued at US$220 billion and projected to reach US$1 trillion by 2040, this is a clarion call. It translates into a clear mandate to leverage cutting-edge technology, innovate relentlessly, and scale operations responsibly. The goal is not only to meet growing domestic demands but also to emerge as a global leader in sustainable chemical manufacturing, thereby becoming one of the key enablers in realising India’s bold economic aspirations.

Note: This article has been contributed by Mr. R Mukundan, President Designate, CII and MD & CEO, Tata Chemicals and was published in CII ARTHA