Background paper – Chemicals
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Transcript of Background paper – Chemicals
Chemicals
2© Confederation of Indian Industry
Content
Sectoral Overview The Potential Existing Enablers Major Challenges faced
3© Confederation of Indian Industry
Sectoral Snapshot
6th Largest Globallyby production
> 2% Sector’s
Contribution to GDP
100% FDI allowed under
automatic route
~15% Sector’s
Contribution to Manufacturing GDP
~6.57%* of total FDI captured by
the sector during April -Dec 2015
~5+ Millionemployment generated
by sector
*FDI Factsheet, DIPP
4© Confederation of Indian Industry
Sectoral Overview
India’s chemical industry was valued at USD 144 Billion in 2015 and is likely to touch USD 214 Billion by 2019 with a CAGR of 9%.
~70,000 commercial products are rolled out of India. The Indian Chemicals Industry is 6th in the world and 3rd in Asia in value added term at constant prices.
It is a key constituent of the Indian economy, accounting for about 2.11 per cent of the GDP. Bulk chemicals account for 39% of the Indian chemical industry, followed by
agrochemicals (20.3%) and specialty chemicals (19.5%)
Specialty chemicals are relatively high valued; their demand is rapidly growing, catering to a diverse end-product market.
5© Confederation of Indian Industry
Sectoral Overview (cont’d)
India accounts for approx. 16% of global production of dyestuffs and dye intermediates.
India is the world’s third largest consumer of polymers and third largest producer of agrochemicals.
Evolution of sector: The sector has moved from commodity based (sourcing of raw/refined chemicals) to need based (manufactured as per needs). Now, the Indian chemical industry is collaborating with manufacturers to create value-based products.
Major sub-segments: Categorised on the basis of end use, the modern chemicals business serves the following broad classes of economic activity: - Base Chemicals- Speciality Chemicals- Pharmaceuticals- Agrochemicals
6© Confederation of Indian Industry
Segment-wise Snapshot
Segment CAGR (2015-2025)*
Pharma APIs 20%
Agro & Pharma Intermediates 18%
Construction Chemicals 15.3%
Other Performance Chemicals 14%
Agro Chemicals 12%
Basic Polymers & Elastomers 8%
- Average growth (last 5 years) : 11.5 % (Frost & Sullivan, 2014) - Average growth (next 5 years) : 10- 13%
*Frost & Sullivan
7© Confederation of Indian Industry
Current Growth Drivers
Policy and Eco-system• India is a bright spot at 7%+ in a gloomy
global economy • Development of infrastructure to
enable chemical and manufacturing industry – warehouses, waste management facilities, ports etc.
• Development of PCIPRs to mitigate the feedstock disadvantage
• 100 per cent FDI is permissible in the Indian chemicals sector; manufacturing of most chemical products is de-licensed
•
Industry Evolution and Capabilities
• Evolving manufacturing standards with increasing compliance to global standards
• India is an ideal location - Development of strong Intellectual Property regime backed by R&D focus is picking up pace in India
• Industry is shifting away from developed economies with higher cost of production to developing economies.
Market• India’s burgeoning middle class is creating an unparalleled end-user market• Current per capita consumption of chemicals is very low at 1/10th of global average. This is
expected to increase in the coming decade. There is a large latent demand.• The shift towards the specialty chemicals market is helping the sector to move from cost
arbitrage play of bulk chemicals. • Promising export potential of chemicals, intermediaries and finished goods from USD3.5 billion
in FY03 to USD 29.62 billion in FY14, a CAGR of 9%• Total exports of chemicals grew from USD3.5 billion in FY03 to USD 29.62 billion in FY14, a
CAGR of 9%
8© Confederation of Indian Industry
Advantage India
Robust Demand* Ample Growth Opportunities
Growth opportunities in Agro, Pharma Intermediates and especially in the Speciality Chemicals segment;
Increasing investment inflows Favorable ecosystem- 100% FDI allowed- Setting up of PCPIRs- Increasing R&D /IP Focus- investments in developing
Chemical Clusters
Potential
With the right eco-system and policy support, the industry can reach USD 214 Billion by 2019.
Strong derived demand - Packaging (15%); Construction (16%); Automotive (12%); Apparel (10%); ~50% of the country’s PVC demand is currently being met through imports
2000-2015 : FDI inflows into the Indian chemicals were ~USD 10.5 Billion.
*figures in brackets indicate projected market growth till FY25 (%per annum); Source: TATA Strategic Management Group
9© Confederation of Indian Industry
Major Challenges faced by sector
• Raw Material security - Feedstock availability & dependence upon imports for intermediates and high feedstock prices compared to global peers
• Sustainability imperative – need for focus on a Green transformation (products and processes) for long term sustainability
• Infrastructural Challenges
• Logistics cost – extremely high in India compared to other economies
• Regulatory and policy issues (e.g. inverted duty structures)
The inbuilt cyclical trends observed in the industry intensify these challenges.
Depending on the supply and demand-side linkages, the severity of challenges differ across segments.