Why in news?
NITI Aayog released its report “Chemical Industry: Powering India’s Participation in Global Value Chains,” envisioning India as a global chemical powerhouse with a 12 per cent share in global value chains (GVCs) and US$1 trillion output by 2040.
Current landscape
- Large but fragmented: India is the world’s sixth‑largest chemical producer and third in Asia, yet the sector is dominated by MSMEs, lacks integrated value chains and invests only 0.7 per cent of revenues in R&D.
- Low GVC share and high import dependence: India’s chemical sector holds only 3.5 per cent share in global value chains and relies heavily on imported feedstocks and speciality chemicals, leading to a US$31 billion trade deficit in 2023.
- Regulatory and skill bottlenecks: Long approval timelines, outdated clusters, high logistics costs and a shortage of skilled professionals impede growth.
Opportunities
- Green chemistry: Global demand for eco‑friendly chemicals creates new markets.
- Supply‑chain diversification: Companies seeking alternatives to China provide an opening for India.
- Trade agreements: Free‑trade agreements with the UAE, EU and ASEAN can unlock duty‑free access to major markets.
- Make in India push: Production‑linked incentives and petrochemical hubs offer scaling opportunities.
- Job creation: Potential to generate about 700,000 skilled jobs by 2030.
NITI Aayog recommendations
- World‑class chemical hubs: Upgrade existing clusters (e.g., Paradeep, Dahej, Vizag) and allocate a dedicated fund for infrastructure.
- Operational expenditure subsidy: Provide support based on import substitution and export potential.
- R&D and technology transfer: Establish an interface body under the DST for industry–academia collaboration and facilitate technology transfers from global firms.
- Streamlined environmental clearances: Simplify approvals through a DPIIT‑led audit committee.
- Skill development: Expand ITIs and specialised institutes, and create courses in polymer science and process safety.
- Trade facilitation: Negotiate chemical‑specific provisions in FTAs and simplify origin certification.
With bold reforms and strategic investments, India’s chemical industry could reduce its trade deficit and emerge as a global leader.