NITI Aayog Report on Chemical Industry | 05 Jul 2025

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. 

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.