A recent report by NITI Aayog titled “Chemical Industry: Powering India’s Participation in Global Value Chains” underscores the strategic role of India’s chemical sector in strengthening its footprint in global trade networks. The think tank outlines how the industry is poised to be a catalyst in transforming India into a major manufacturing hub and improving its integration with global value chains (GVCs), especially in a post-pandemic, supply-chain-diversified world.
A Sunrise Sector with Global Promise
India’s chemical industry is currently the 6th largest in the world and 3rd in Asia, contributing nearly 7% to India’s GDP and accounting for around 13% of total industrial output. With the global chemical market projected to reach over $8 trillion by 2030, India’s share is expected to grow significantly, driven by rising domestic demand, export competitiveness, and shifting supply chains away from China.
Report Highlights: Strategic Findings
The NITI Aayog report identifies five critical pathways for the chemical sector to boost India’s GVC positioning:
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Attracting Large-Scale Investment
The report recommends enabling policies to attract both foreign direct investment (FDI) and domestic capital into specialty chemicals, petrochemicals, and green chemistry segments. -
Building Integrated Clusters
Development of world-class chemical clusters, including Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs), to improve scale, logistics, and backward-forward linkages. -
Focus on Green and Specialty Chemicals
Emphasizing production of low-carbon, high-margin specialty chemicals to meet rising global demand in pharmaceuticals, EV batteries, agrochemicals, and electronics. -
Regulatory Simplification
Calls for uniform environmental and safety regulations across states, faster approvals, and enhanced R&D funding. -
Skills and Technology Upgradation
Investment in chemical engineering education, skilling programs, and adoption of Industry 4.0 in chemical manufacturing for increased efficiency and sustainability.
India’s Competitive Edge
According to the report, India has several structural advantages:
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Low-cost manufacturing base with strong engineering and scientific talent
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Rapidly expanding domestic market, projected to cross $300 billion by 2028
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Strategic location with access to growing markets in Asia, Africa, and the Middle East
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Government schemes such as PLI for chemicals, National Hydrogen Mission, and Make in India initiatives
Barriers to Overcome
Despite the potential, NITI Aayog warns that challenges such as fragmented production, dependence on imported feedstock, infrastructure bottlenecks, and limited innovation are holding back the sector’s growth. The report calls for a “whole-of-government” approach to align trade, environment, labor, and industrial policy with sectoral needs.
The NITI Aayog report envisions the chemical industry not just as an economic contributor, but as a strategic lever for India’s integration into global value chains. With targeted reforms, investment in infrastructure and technology, and a push for sustainable practices, the chemical sector could help India emerge as a trusted global manufacturing partner—diversifying away from traditional supply hubs and strengthening India’s ambition to become a $5 trillion economy.
