Niti Aayog Report on Chemical Industry
Kartavya Desk Staff
Syllabus: Industry
Source: ANI
Context: NITI Aayog released its report “Chemical Industry: Powering India’s Participation in Global Value Chains”. The report envisions India becoming a global chemical powerhouse with 12% GVC share and USD 1 trillion output by 2040.
About Niti Aayog Report on Chemical Industry:
India’s Chemical Industry: Current Landscape:
• Significant GDP Contributor: India is the 6th largest chemical producer in the world and 3rd in Asia, contributing over 7% to manufacturing GDP.
E.g., The sector supports pharma, textiles, agriculture, and construction.
• Fragmented Sector: Dominated by MSMEs, India’s chemical sector lacks integrated value chains and modern infrastructure.
E.g., Cluster-based growth is uneven across Gujarat, Maharashtra, and Tamil Nadu.
• Low Share in GVC: India holds only 3.5% share in global chemical value chains, reflecting poor backward integration and low export competitiveness. Trade deficit stood at USD 31 billion in 2023.
• High Import Dependency: Imports of feedstocks and specialty chemicals from China and Gulf countries dominate.
E.g., Over 60% of critical APIs rely on Chinese imports.
• Low R&D Investment: India invests just 0.7% of industry revenue in R&D, versus global average of 2.3%. This hampers innovation in green and high-value chemicals.
• Regulatory Bottlenecks: Environmental clearances and procedural delays add to cost and time overruns.
E.g., EC delays can take up to 12–18 months.
• Skill Shortages: 30% shortfall in trained professionals in green chemistry, process safety, and nanotech.
E.g., ITI and vocational skilling have not matched industry demand.
Opportunities for India’s Chemical Industry:
• Green Chemistry Boom: Global shift towards eco-friendly and sustainable chemicals opens up new markets.
• Supply Chain Diversification: Rising global distrust of China offers India a chance to emerge as an alternate supplier.
• FTA Leverage: FTAs with UAE, EU, and ASEAN can unlock tariff-free access to major markets.
• Make in India Push: Government support via PLI schemes, PCPIRs, and chemical parks provide ecosystem for scale.
• Job Creation Potential: The sector can create 7 lakh skilled jobs by 2030, especially in petrochemicals, research, and logistics.
Challenges Faced by the Sector:
• Feedstock Vulnerability: High dependence on crude oil and naphtha imports exposes firms to price shocks and supply risks.
• Outdated Clusters: Legacy clusters lack modern storage, safety systems, and waste treatment infrastructure.
• High Logistics Cost: Freight cost in India is 2–3 times higher than global peers, reducing export competitiveness.
• Regulatory Burden: Lack of single-window clearances, frequent policy changes, and state-level conflicts delay investments.
• Limited Industry-Academia Link: Weak partnerships result in low patent generation and limited skill innovation.
NITI Aayog Recommendations:
• World-Class Chemical Hubs: Upgrade existing clusters, create empowered committees, and allocate Chemical Fund for infrastructure.
E.g., Paradeep, Dahej, Vizag proposed as new mega-clusters.
• Opex Subsidy Scheme: Support incremental production based on import substitution and export potential.
• Tech Access & R&D Boost: Interface body under DST for industry-academia collaboration. Facilitate tech transfer from global MNCs.
• Interface body under DST for industry-academia collaboration.
• Facilitate tech transfer from global MNCs.
• Fast-Track Environmental Clearance: Simplify EC process via DPIIT audit committee. Increase transparency and accountability.
• Simplify EC process via DPIIT audit committee.
• Increase transparency and accountability.
• Skilling & Industry Partnership: Expand ITIs and specialized institutes. Create tailored courses in polymer science, process safety.
• Expand ITIs and specialized institutes.
• Create tailored courses in polymer science, process safety.
• FTAs for Chemicals: Negotiate chemical-specific clauses in FTAs. Ease documentation and origin proof mechanisms.
• Negotiate chemical-specific clauses in FTAs.
• Ease documentation and origin proof mechanisms.
Conclusion:
India’s chemical sector holds enormous potential to lead globally, but must overcome structural, regulatory, and skill-related hurdles. With bold reforms, strategic investments, and global partnerships, India can reduce its trade deficit and dominate the value chain. The NITI Aayog blueprint offers a clear, actionable path to turn this ambition into reality.