India's chemical industry has played an important role in the development of the country's economy. The industry includes basic chemicals and chemical products, petrochemicals, agrochemicals, dyes, paints and varnishes, synthetic fibres and industrial gases. Chemicals and chemical products is the second largest industry in the manufacturing sector after basic metals. The Indian government sees the chemical industry as integral to the Indian economy and came out with a Draft National Chemical Policy in March 2012, which intends to transform India into a major manufacturing hub of chemicals.

Despite uncertain conditions in the global economy and slowdown in industrial production, the chemical industry performed better than its historic average in the first nine months of FY13. The sector also outperformed the overall manufacturing sector in terms of production during the second half of the year. Chemical exports were resilient and registered export growth in all the major segments. However, chemical imports have been leading chemical exports for many years, resulting in a net trade deficit in the sector. With growing concerns of widening overall trade deficit, the Indian government is embarking on plans to increase the country’s chemical exports.

The long term outlook for the Indian chemical sector is stable because of a growing construction sector, a large textile sector, and a growing need for agrochemicals. The introduction of the National Chemical Policy and other such government incentives will further add to the growth of this sector.

Key Points:

• Chemicals and chemical products are one of the major industry groups tracked by the index of industrial production. It constitutes about 10.1% of the industrial output represented by IIP and grew at a CAGR of 2.1% during fiscal years 2007-2012.

• In the period 2007-2012, chemical exports saw a double-digit annual growth rate of 16%. Organic chemical accounted for almost 60% of total Indian chemical exports, followed by tanning and dye extracts with 10% and inorganic chemicals with 9%.

• In the period 2007-2012, chemical imports saw a double-digit annual growth rate of 19%. Organic chemical accounted for more than half of the total chemical imports, followed by inorganic chemicals with 21%.

• In 9MFY13, the chemical manufacturing index grew by 2.7%, outperforming its historic growth rates. The sector also outperformed the overall manufacturing sector in India during the second half of the year.