India's Chemical Industry Forecasted To Reach $1 Trillion By 2040 Despite Projected Trade Deficit

A recent study conducted by the Indian Chemical Council (ICC) and McKinsey & Company predicts that India’s chemical trade deficit will escalate to $40-42 billion by 2040, surpassing the current level of $9-10 billion.

Despite this, the Indian chemical industry is forecasted to skyrocket to a colossal $850-1000 billion by 2040, snatching a 10%-12% stake in the global chemicals sector and expanding at a yearly rate of 9%-10% from $170-180 billion in 2021. Exports are projected to rise at a CAGR of 9.5-10% by 2040, whereas imports are anticipated to grow at a matching rate of 9-9.5%. Currently, the chemical industry in India is worth an estimated USD 220 billion, and it is expected to reach the USD 1 trillion milestone by 2040.

Speciality Chemicals To Standout

The speciality chemicals segment is anticipated to standout among other segments of the chemical sector, rocketing to the top as the fastest-growing segment. It is predicted that exports in the chemical segment will rocket tenfold in the next 20 years, rising from approximately $2 billion in 2021 to an estimated $21 billion by 2040.

A huge 80% of these exports will stem from four key sub-segments:

1.     Agrochemicals

2.     Dyes and pigments

3.     Cosmetics and personal care

4.     Food ingredient chemicals

Several factors will be propelling this growth, such as rising disposable income, a favourable demographic dividend, an increasing inclination towards bio-friendly options, and the diversification of global supply chains.

Comprehensive Economic Partnership Agreement

The Comprehensive Economic Partnership Agreement (CEPA) between India and the United Arab Emirates promises to be a major boon to India’s chemical industry. This sector provides jobs to over two million people and contributes a whopping 9% to India’s manufacturing gross value added and 13% of the country’s total export value – a positive step forward that is sure to reap great rewards.

Insight

Although India’s chemical trade deficit is expected to rise, the chemical market in the country is also poised for significant growth. With the speciality chemicals segment likely to be a key driver of this growth, the Indian chemical industry is well-positioned to capitalize on these opportunities, given the supportive policies such as 100% FDI allowed through the automatic route and recent trade agreements, and make a significant contribution to the country’s economic growth.

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