The Indian Chemicals Industry is one of the most diversified among other industrial sectors covering a multitude of commercial products and comprises of both small scale as well as large scale units. With linkages to several other sectors of the economy, it enjoys a position of paramount importance. It now stands in the midst of a transformative change – having to innovate in a digital landscape and strengthening its manufacturing prowess to become a global hub, all the while contending with growing sustainability imperatives.
To delve deeper into various aspects of the Indian chemical sector, CII and KPMG in India has today launched a knowledge report titled – “Chemicals value chain transition – addressing the impact of ESG, globalisation and innovation” at the 5th edition of CII Chemical Conference. This report provides an overview of the Indian chemicals sector while focusing on the trifecta of sustainability, digitalisation, and supply chain resilience and a call to action to relevant stakeholders across the chemicals value chain.
Growth trends across chemical segments
India has the opportunity and potential to become a viable alternative platform for chemicals production. The nation offers a host of benefits including low-cost operations; availability of raw materials; skilled labour; and favourable government policies. The country is also set to gain from long coastlines and waterways to facilitate trade, significant import substitution opportunities, strong intellectual property protection, and a growing domestic market. Some key trends observed are as follows:
- The sector is witnessing increased momentum towards chemical consumption in Asian countries
- There is a visible shift towards sustainable consumption leading to increased investments in green chemicals
- The rise of Automation, Augmented reality, and digital twins is expected to improve operations and boost productivity
- The Chemical sector is witnessing one of the most active M&A markets, with sponsor-owned assets in the process of sale, resulting in large-scale corporate carve-outs
India on a transition path
The country is witnessing extensive transformation that is turning local players global, with the country fast appearing as a global manufacturing hub. Burgeoning domestic consumption, increasing disposable incomes, and switching consumer preferences are quickening already strong demand, putting India on the forefront of global chemical manufacturing map and making it a hub for the world.
Sustainability – ESG factors have become increasingly important for companies in the chemical sector globally. Sustainability and responsible practices are becoming more important for investors and stakeholders, and they are increasingly considering ESG performance as a key factor in their investment decisions. It is important for stakeholders in the chemical sector to have a sustainability vision.
India as Chemicals Hub 2.0 – India is one of the largest consumers of chemicals in the world, but it is also heavily dependent on imports to meet its demand. Given the high import dependency, it is very critical for countries like India to ensure an uninterrupted global supply chain. Many chief executives now identify supply chain turmoil as the greatest threat to the sectoral growth which has a direct impact on national economies. Organisations need to re-imagine and manage their supply chain differently to ensure business continuity and growth for the future.
Innovating for brighter future for chemicals – Innovation is essential for the future of the chemical industry. There are several enablers that can help to sustain growth and innovation in the chemical industry. These include –
- Government can play a crucial role by supporting innovation in the chemical industry by providing funding for research and development (R&D), creating tax breaks for R&D, and investing in infrastructure
- Collaboration between companies, universities, and government agencies can help to accelerate innovation
- Investment in new technologies and R&D is essential for sustaining growth and innovation
- Implementation of digital technologies to optimise processes and developing new materials with improved properties and bio-based materials
Commenting on the report, Manas Majumdar, Partner, Leader – Oil & Gas and Chemicals, KPMG in India said, “The Indian chemical sector is well positioned to become an attractive manufacturing destination to serve domestic demand as well as global markets. This has become possible due to an inherent increase in demand across multiple end-user segments in India, be it automotive, electronics or consumer goods. This sector, in addition to adopting innovative and green technologies along with digitalisation in operations, needs a more comprehensive and integrated approach which leverages the academia-industry-government helix to ensure the right blend of cutting-edge research, business economics and policy support in place so that the sector rejuvenates and stays relevant in the coming years.”
Key takeaways
The Indian chemicals sector can take several strategic actions to further enhances its market, sustainability, and overall positive impact on the economy.
- Investing in research and development is highly crucial – The industry should allocate resources to innovate new processes, materials and technologies that align with global sustainability standards. Through fostering a continuous innovation, the sector can stay ahead of regulatory changes, stringent compliances, environmental concerns, and path a way to develop high-value eco-friendly products.
- Adoption of digitalisation – It can significantly improve efficiency and operational excellence. Advanced technologies such as AI, IoT, Bigdata, etc., can optimise production processes, enhance supply chain management, and reduce resource consumption.
- Ensuring supply chain resilience – Chemical companies need to build a more resilient supply chain to protect themselves from small to large scale disruptions. Considering the fact that chemical sector relies heavily on the international trade, it become extremely important for chemical companies to build resilient supply chain.
- Assistance from Government bodies – Assistance from government in an appropriate form could expedite the transition journey towards a sustainable approach. Provision of production linked financial incentives, subsidies and budget allocation for research and development, incentives for environmentally friendly practices, creation of public forums for collaboration across the industry are some of the ways by which Government bodies can assist.
