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Chemical Industry Poised To Bring Indian Economy Back On Growth Track
Chemicals sector turned a net exporter with a trade surplus in FY 2019-20 after decades of deficits. This feat looked insurmountable just a couple of years ago but the Industry rose to the challenge.
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The Indian chemical industry – the 6th largest in the world and 3rd largest in Asia – is one of the oldest industries in our country. Throughout the years, the chemical industry has served as the backbone of the industrial and agricultural development of India. Accounting for 7% of the GDP, 14% in overall index of the industrial production, and employing over 2 million people. For the past couple of decades, the industry has consistently delivered higher growth when compared to India’s GDP and therefore remains optimistic on its ability to play an important role in the country’s economic revival in a post COVID-19 world.
Revival of economic activity
The impact of COVID-19 on the people, economy and industry is well documented. While all sectors have had to deal with it, the manufacturing sector in India has been impacted more deeply than others due to the supply chain disruptions. As per United Nations Conference on Trade and Development (UNCTAD), India ranks among the top 15 most affected economies due to a slowdown in production. Key industries such as automotive, textile and building materials have suffered the most during this time, thereby aggravating the impact on the economy. In addition, closure of ports and inland transportation as well as shipping liners have also affected the usual supply chain. Various other supply chain complexities such as lower production rates due to lack of work force, transportation and packaging, resulted in under-utilization of available resources. However, with the resumption of economic activity across the country and relaxations provided by the government, the value chain is now easing into place progressively, although not back to the usual normal levels yet.
Green shoots of revival
Industries are now adapting to the new normal and bouncing back after unlock was initiated. India’s economic recovery is expected to be slow and steady, as large sections of the country make staggered return to work.
The chemical industry also serves as a feeder for many other industries, which may play an important role in our economic revival. The industry is adapting to changing needs and modifying supply chains, catering to new demands. Chemical companies now provide a wide range of products required for the production of sanitizers, disinfectants, test kit sets, ventilator parts, face shields, masks and PPE apart from supporting the pharma industry in key ingredients and packaging materials.
The way forward
As the country prepares to unlock fully and resume economic activities, several sectors such as automotive and consumer durables are witnessing an uptake in growth as compared to previous months. New opportunities have opened up for the chemical industry, with global supply chains looking to realign sourcing to mitigate future risks. It is also important to note the growing emphasis from the government and industry at-large on sourcing locally.
Sectors such as electronics, telecommunications, office automation equipment, large appliances etc are now stepping up to increase local manufacturing. Established sectors like automotive and FMCG too are now realigning and developing local supply chain capability due to lessons learnt from the disruptions caused by the pandemic. Many of the medical applications like PPE, disposables and devices have established the capabilities to not only meet the domestic need, but also exporting in a short period. All these emerging opportunities for new entrepreneurs will create job avenues for many across India, contributing back to our economic growth.
At present, Indian Government’s well thought through and ambitious growth target for the Chemical sector – $304 billion by 2025, may seem challenging in the wake of the pandemic.
Chemicals sector turned a net exporter with a trade surplus in FY 2019-20 after decades of deficits. This feat looked insurmountable just a couple of years ago but the Industry rose to the challenge. It is well within the chemical Industry’s reach to regain its growth momentum and contribute to all other industries to put the Indian economy back on its growth path.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.