• NITI Aayog proposes incentives, port upgrades, and cluster development to boost India's chemical exports and reduce trade deficit.

About the Report

• NITI Aayog has proposed measures to nearly double India’s $44 billion chemical exports by 2030.
• Key recommendations include developing production clusters for scale, upgrading port infrastructure for improved logistics and storage, and introducing a sales-linked incentive scheme to localise production and enhance exports of critical chemicals. 
• The initiative addresses limited domestic demand as a major growth constraint.

Proposed Interventions for Growth

• Establish world class Chemical Hubs in India through revamping existing clusters and developing new ones.
• Develop existing port infrastructure: Composition of a Chemical Committee for ports to advise on and address infrastructural gaps in chemical trading at ports
• Development of 8 high-potential clusters
• Introduce a Opex subsidy scheme of the for chemicals: Incentivize incremental production of chemical based on import bill, export potential, single source country dependence, end-market criticality etc.
•  Fast-track environmental clearance with transparency and accountability
• Simplify and fast-track EC clearance process through setting up an audit committee under DPIIT to monitor timelines and compliance and publish periodic reports and give more autonomy to EAC.
• Securing FTAs to support Industry growth: Targeted FTA negotiations: Moving forward, India could negotiate FTAs that incorporate specific provisions for the chemicals industry including incorporating industry focused protections such as tariff quotas or selective duty exemptions on critical raw materials and petrochemical feedstocks.

India Chemical Industry

• India is the 6th largest chemical producer globally and 3rd in Asia, contributing 7% to the national GDP.  It ranks 14th in global chemical exports (excluding pharma).
• In FY23, exports of major chemicals and petrochemical products stood at US$ 23.8 billion.
• It had a $31 billion trade deficit in chemicals in 2023 and held a 3.5% share in global value chains, compared to China’s 23%.
• India’s chemical market was valued at $220 billion in 2023, with ambitions to reach $1 trillion by 2040.

Manufacturing Hubs

• Chemical manufacturing is concentrated in Maharashtra and Gujarat, with West Bengal and Tamil Nadu also being major contributors.
• India’s chemical industry produces over 80,000 commercial products and is classified into bulk chemicals, agrochemicals, specialty chemicals, polymers, petrochemicals, and fertilizers.

Vision for 2030

• The vision for 2030 is for India to become a global chemical manufacturing powerhouse with a 5%-6% share of the global chemical value chain.
• The sector aims to double its current production levels and reduce the trade deficit significantly from USD 31 billion in 2023 to reach a Net Zero trade balance in Chemicals.
• The initiative will generate an additional export of USD 35-40 billion generating around 7 lakh skilled jobs.

Conclusion

• India has significant potential to become a global leader in the chemical industry. Achieving this goal requires focused efforts from the central and state governments, as well as industry stakeholders.
•  By addressing the existing challenges and leveraging the proposed interventions, India can enhance its competitiveness, attract investments, and build a robust chemical sector capable of leading the global value chain.