NITI Aayog Report on Chemical Industry

• 05 Jul 2025

For Prelims: NITI Aayog, Global Value Chains, Chemical Industry, Viability Gap Funding (VGF), Free Trade Agreements (FTAs), PLI Scheme, Extended Producer Responsibility (EPR), Anti-dumping, Carbon Border Adjustment Mechanism (CBAM), MSME.                       

For Mains: Status and challenges associated with the chemical industry in India, NITI Aayog proposed policy interventions to promote chemical industry. 

Source: PIB  

Why in News? 

NITI Aayog released its report titled ‘Chemical Industry: Powering India’s Participation in Global Value Chains’, outlining an ambitious roadmap for India to become a global chemical manufacturing powerhouse. 

• The report envisions India achieving a 12% share in global chemical value chains (GVC) and a USD 1 trillion output by 2040. 

What is the Status of the Chemical Industry in India? 

• Global Standing: India ranks as the 6th largest chemical producer globally, contributing over 7% to the manufacturing GDP.  
  • The chemical sector supports critical industries such as pharma, textiles, agriculture, and construction. 
• Feedstock Utilization: India shows over-concentration in bulk chemical production, with 87% of benzene used for alkylbenzene, chlorobenzene, and cumene, unlike the global trend where only 25% is used similarly and more goes to complex derivatives. 
• Low Share in Global Value Chains (GVC): India holds only a 3.5% share in global chemical value chains, with a USD 31 billion trade deficit (2023). 
  • The sector remains fragmented, dominated by MSMEs, with growth concentrated in Gujarat, Maharashtra, and Tamil Nadu. 
• Skill and Innovation Gaps: There is a 30% shortage of skilled professionals, especially in green chemistry, nanotechnology, and process safety.  
  • R&D investment is just 0.7% of industry revenue, well below the global average of 2.3%, limiting innovation in high-value and sustainable chemicals. 
• Import Dependence: The sector is heavily import-dependent, sourcing over 60% of critical Active Pharmaceutical Ingredients (APIs) from China, and other feedstocks from Gulf countries.  
• Regulatory Bottlenecks: clearances and regulatory delays add to operational costs, with delays of up to 12-18 months for approvals. 

What are the Opportunities in India’s Chemical Industry? 

• Rising Domestic Demand: India’s consumer and industrial growth is fueling demand in agrochemicals (4th-largest producer), pharmaceuticals (3rd-largest drug producer), and construction & automotive (paints, adhesives, polymers). 
  • Refinery expansions (e.g., Reliance, Nayara, BPCL) will further boost petrochemical production. 
• Job Creation: The sector is expected to generate 7 lakh skilled jobs by 2030, particularly in areas such as petrochemicals, research, and logistics. 
• Global Supply Chain Shift: India can capture the shifting global chemical trade from China, especially in dyes & pigments, surfactants, textile chemicals, and electronic chemicals used in semiconductor and EV battery manufacturing. 
• Green & Sustainable Chemicals: The global shift toward bio-based and green chemicals is creating demand for bio-plastics, and bio-lubricants where India’s sugar and biomass resources can support the production of bio-based chemicals. 

 

What are the Proposed Policy Interventions by NITI Aayog to Promote Chemical Industry? 

• World-Class Chemicals Hubs: Establish hubs by forming an Empowered Committee with a dedicated Chemical Fund for shared infrastructure and Viability Gap Funding (VGF). 
• Port Infrastructure: Set up a Chemical Committee for ports and develop 8 high-potential chemical clusters near ports to enhance logistics and export capabilities. 
• OPEX Subsidy Scheme: Introduce an OPEX Subsidy Scheme to incentivize incremental production based on import reduction, export potential, single-source dependency, and end-market criticality. 
• Develop & Access Technologies: Promote self-sufficiency and innovation by disbursing R&D funds for industry-academia collaboration via DCPC and partnering with MNCs to bridge technological gaps. 
• Fast-Track Environmental Clearances: Simplify and expedite Environmental Clearances (EC) through an audit committee under DPIIT to ensure compliance. 
• Secure FTAs: Pursue targeted FTAs with tariff quotas and duty exemptions on critical raw materials and feedstocks; improve FTA awareness, origin proof procedures, and export competitiveness. 
• Talent & Skill Upgradation: Expand ITIs and specialized training institutes to meet the growing demand for skilled labor, and strengthen industry-academia partnerships for courses in petrochemicals, polymer science, and industrial safety. 

India’s Initiatives to Support the Chemical Industry 

• Production linked incentive (PLI) Scheme: PLI Scheme for Promotion of Domestic Manufacturing of Critical Key Starting Materials (KSMs), Drug Intermediates and APIs aims to boost domestic production by encouraging the establishment of Greenfield plants.  
• PCPIR: The Petroleum, Chemicals and Petrochemicals Investment Region (PCPIR) set up at Paradip has attracted investments worth USD 8.84 billion, resulting in employment of about 40,000 people. 
• Jan Aushadhi Kendras: The Government aims to open 25,000 Jan Aushadhi Kendras to ensure affordable access to medicines. 

What Steps are Needed to Strengthen the Chemical Industry? 

• Global Integration: Sign Mutual Recognition Agreements (MRAs) to align Indian chemical standards with global norms, and establish a dedicated chemical export promotion council for market access and brand building.  
• Strengthen Safety Standards: Enforce strict safety norms and implement real-time monitoring systems in chemical clusters to enhance safety and compliance.  
  • Promote green and sustainable chemistry through waste recycling, low-emission processes, and incentivize adoption of zero liquid discharge (ZLD) and clean production technologies. 
• Financial & Investment Support: Ease access to capital by offering lower interest loans to MSME chemical manufacturers and promoting venture capital funding for specialty chemical startups, while ensuring risk mitigation through subsidized insurance. 
• Skill Development: Upskill the workforce through industry-aligned chemical engineering courses focusing on process safety and green technology. 
  • Enhance safety protocols by mandating Process Safety Management (PSM) audits and enforcing the Chemical Accidents Rules, 1996 more strictly. 

Conclusion 

India’s chemical industry, a GDP growth driver, aims to become a global manufacturing hub by 2030 through policy interventions like chemical hubs, OPEX subsidies, FTAs, and an R&D push. Overcoming import dependency, regulatory hurdles, and sustainability challenges requires global integration, safety enforcement, green chemistry, and skill development to achieve USD 1 trillion market potential.

Drishti Mains Question:

Q. Discuss the status, challenges, and policy measures required to make India a global leader in the chemical industry. 

UPSC Civil Services Examination, Previous Year Questions (PYQs)  

Prelims  

Q. In India, ‘extend producer responsibility’ was introduced as an important feature in which of the following? (2019)

(a) The Bio-medical Waste (Management and Handling) Rules, 1998  

(b) The Recycled Plastic (Manufacturing and Usage) Rules, 1999  

(c) The e-Waste (Management and Handling) Rules, 2011  

(d) The Food Safety and Standard Regulations, 2011  

Ans: (c)