Targeted reforms encompassing a comprehensive range of fiscal and non-fiscal interventions will enable India to have a USD 1 trillion chemical sector and achieve 12% GVC share by 2040, thus becoming a global chemical powerhouse, said NITI Aayog.
In a landmark report titled “Chemical Industry: Powering India’s Participation in Global Value Chains”, NITI Aayog outlined a transformative roadmap to make India a global chemical manufacturing powerhouse by 2040.
The report provides a detailed assessment of the sector’s current limitations, emerging opportunities, and a strategic plan to increase India’s share in the global chemical value chain from 3.5 to 12%.
The global chemical industry is undergoing significant shifts driven by realigned supply chains, rising demand for specialty and green chemicals, and growing emphasis on innovation and sustainability. India, while being the sixth-largest producer globally, remains heavily dependent on imports and suffers from a chemical trade deficit of USD 31 billion as of 2023.
Despite its considerable domestic market, India’s chemical sector faces structural issues—limited backward integration, poor infrastructure, high logistics costs, and a low R&D investment rate of just 0.7%, compared to the global average of 2.3%. Regulatory delays and a skilled manpower shortage of 30% in critical areas like green chemistry and process safety further constrain the sector.
To drive the transformation of India’s chemical industry, NITI Aayog has proposed a comprehensive seven-pillar strategy combining both fiscal and non-fiscal interventions.
The first pillar focuses on establishing world-class chemical hubs by revamping existing industrial clusters and developing new ones, supported by a Central Empowered Committee and a dedicated Chemical Fund to finance shared infrastructure.
The second pillar aims to enhance port infrastructure through the formation of a Chemical Committee at major ports and the development of eight high-potential chemical clusters to improve trade logistics.
The third pillar introduces an operational expenditure (Opex) subsidy scheme to incentivize incremental production of chemicals, particularly those with high import dependency or export potential.
The fourth pillar emphasizes strengthening research and innovation by increasing R&D funding and fostering collaboration between industry and academia, along with facilitating access to advanced technologies through global partnerships.
The fifth pillar seeks to streamline regulatory processes, especially environmental clearances, by setting up an audit committee under DPIIT to fast-track approvals and ensure transparency.
The sixth pillar highlights the importance of securing Free Trade Agreements (FTAs) that include sector-specific provisions, such as tariff exemptions on critical raw materials, while also promoting greater awareness and ease of access to FTA benefits among exporters.
Lastly, the seventh pillar addresses the critical need for talent development through the expansion of ITIs, upgrading of faculty, and closer industry-academia collaboration to deliver training in core areas like petrochemicals, polymer science, and industrial safety.
Further, the report sets a bold target for the sector to reach USD 1 trillion in output and 12% global GVC participation by 2040. By 2030, India aims to Increase its share in global chemical value chains to 5-6%, Achieve Net Zero trade deficit, Add USD 35–40 billion in exports, and Generate around 7 lakh skilled jobs.
NITI Aayog believes that, with these interventions, India can significantly enhance its self-sufficiency, improve trade performance, and become a key global supplier of specialty and green chemicals. The report calls for coordinated efforts between the Centre, states, and industry stakeholders to realize this vision.