Speciality Chemical Sector In India: An Overview of Recent Trends and Growth Opportunities
The speciality chemical sector in India is one of the oldest business domains. Over
the years, it has evolved from being essentially a supplier of natural extracts to
cater to diverse requirements in the global market.
Currently, the Chemicals Sector in India commands more than 5% market share in the US$600 billion global speciality chemical market.
At present, India is the 6th largest producer of chemicals. As per various economic reports, the size of the Indian speciality chemical sector is expected to reach a valuation of US$64 billion over the next 5 years. These reports collectively state the robust demand CAGR of about 10-20% in export and end-user industries will be the primary driving forces behind this growth.
With this remarkable rise in the speciality chemical industry, there is also a growing demand for funds to meet the working capital requirements. Following this, the sector is witnessing a significant interest of foreign investors who are willing to enter the Indian market and looking forward to setting up manufacturing plant in India.
Speciality Chemical Sector in India: Growing Demand & Market Size
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Market Size
As per reports shared by India Brand Equity Foundation, the speciality chemical sector in India constitutes about 22% of the total chemical and petrochemical market in the nation. Reports shared by Business Wire research further states that the growing demand for speciality chemicals in the country across various sectors is allowing the industry to expand at a CAGR of approximately 11%.9% in FY 2019-2024.
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Growing Demand
Several global market reports estimate that by 2025, Asia will drive about 70% of the incremental speciality chemical demand. A major portion of this growth will be primarily fuelled by the growing demand in various Indian end-user industries. This includes food processing, home care, personal care, and more.
Among all, the agrochemicals, speciality polymers, surfactants, and textile chemicals will be the major driver of the growth of Indian speciality chemical sector.
Apart from this, scope for foreign investment and Greenfield setup in India via speciality chemical sector is also being boosted by some emerging segments like cosmetic chemicals, flavours, adhesives and sealants, printing inks, water management chemicals, food additives, and more.
Therefore, to capture this lucrative opportunity and formulate an adequate market-entry strategy, the demand for industrial plant setup consultants is increasing among foreign investors.
Increasing investments
As per recent reports, a total investment of US$107.38 billion is estimated in the various chemical industrial sectors in India by 2025. In fact, the continued strength of the speciality chemical sector has been one of the key drivers for increasing foreign investments and M&A activities.
The speciality chemical sector is still mostly unorganised and consists of mainly small companies with a regional presence. Hence, the demand for larger amounts of capital is becoming crucial to cater to the rising domestic and global market consumption. The need for standardizing R&D and innovation in the Indian speciality chemical sector is the primary need of the hour.
Consequently, there is growing foreign investor interest in this unorganised sector. They are willing to enter the Indian market via the M&A channel and undertake manufacturing plant setup in India through lump sum investments.
The speciality chemical sector is still mostly unorganised and consists of mainly small companies with regional presence. Hence, the demand for larger amounts of capital is becoming crucial to cater to the rising domestic and global market consumption. The need for standardizing R&D and innovation in Indian speciality chemical sector is the primary need of the hour.
Consequently, there is growing foreign investor interest in this unorganised sector. They are willing to enter the Indian market via the M&A channel and undertake manufacturing plant setup in India through lump sum investments.
Competitive Advantages
The growth of India’s speciality chemical sector is aided by several competitive advantages, some of which are:
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An Indomitable Export Presence
India is one of the few Asian countries with low-cost manufacturing capabilities coupled with a workforce and strong engineering skills and abundant human resources. This has made India one of the most preferred manufacturing destinations among foreign investors.
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Low-Cost Skilled Labour
One of the biggest competitive advantages of India is the availability of low cost skilled labourers. Therefore, investors who are willing to setting up manufacturing plant in India and capture the booming speciality chemical market can save a great deal of their operational cost.
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Growing Domestic Demands
With an average rise in the disposable income of people in India and growing urbanization, the demand for end-user products like personal care, textiles, home care, paints, etc., is on the rise.
Government Initiatives
In order to support the growth of Indian speciality chemical sector and boost R&D, the Indian Government has introduced various lucrative policies, like:
In fact, the demand for speciality chemicals in India is expected to double by 2025. Such shift in consumer preference and demand is creating profitable opportunities for foreign investors in speciality chemical sector and manufacturing plant setup in India.
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Recent FDI Policy Support-
The Government of India has allowed a 100% FDI through automatic routes in the chemical sector, except for few hazardous chemicals. This proves extremely beneficial for foreign companies who are looking forward to undertaking Greenfield setup in India.
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PLI Scheme-
Indian Government wants to explore opportunities, reduce imports and boost exports of speciality chemicals by attracting investments in this sector. Therefore, the Indian Government has planned to implement a PLI or Production Linked Incentive scheme with other lucrative policies.
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National Chemical Policy-
Further, the Indian Government has also decided to draft a specialised National Chemical Policy. It aims to increase the share of the chemicals sector to about 6% in the GDP within the next 10 years.
How to Enter in Chemical Sector in India: Need for Industrial Plant Setup Consultants
The speciality chemical sector in India is growing immensely competitive. In order to enter this sector and establish a strong business presence, it is crucial for foreign investors to fulfil several registration and legal requirements and formulate a strategic market-entry formula.
The best way to mitigate these market-entry challenges is to collaborate with some reliable industrial plant setup consultants in India like Tecnova.
With a thorough market analysis and customized India-specific market entry strategies, which include M&A support, Greenfield project management, partner search, company incorporation & regulatory compliance, such consultants will help you in setting up manufacturing plant in India without much hassle.
With rising domestic demand and unmatched competitive advantages, the speciality chemical sector is presenting promising opportunities for foreign investments. Aided by favourable Government policies, companies in this sector can enjoy several advantages and scope of profitability with an adequate implementation plan.
Hence, to make the most of such robust opportunities, foreign investors need to strategize their business goals and investment planning with adequate Indian market-specific strategies. This will ensure long-term returns from investment alongside sustainable growth.
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