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NITI Aayog has released a comprehensive report envisioning India’s transformation into a global chemical manufacturing hub with a projected 12% share in global value chains (GVCs) and USD 1 trillion in output by 2040.

Current Landscape of India’s Chemical Industry

• Significant Economic Contributor: India is the 6th largest chemical producer globally and 3rd in Asia, contributing over 7% to manufacturing GDP. Key linkages: Pharmaceuticals, textiles, agriculture, and construction.
• Fragmented Sector Structure: Dominated by MSMEs, the sector suffers from lack of integrated value chains and modern infrastructure. Example: Cluster-based growth is concentrated in Gujarat, Maharashtra, and Tamil Nadu.
• Low Global Integration: India’s 3.5% share in global chemical value chains reflects weak backward integration and poor export competitiveness. The trade deficit in 2023 was USD 31 billion.
• High Import Dependence: Heavy reliance on China and Gulf countries for feedstocks and specialty chemicals. Example: Over 60% of critical Active Pharmaceutical Ingredients (APIs) are sourced from China.
• Negligible R&D Investment: India invests only 0.7% of industry revenue in R&D, far below the global average of 2.3%, limiting innovation in green and specialty chemicals.
• Regulatory and Procedural Hurdles: Environmental clearance (EC) delays (up to 12–18 months) and procedural bottlenecks lead to cost and time overruns.
• Skilling Deficit:
  A 30% shortage of skilled professionals in green chemistry, process safety, and nanotechnology. Example: ITIs and vocational programs lag behind industry requirements.

Emerging Opportunities

• Green Chemistry Revolution: Global shift toward sustainable chemicals presents new market opportunities.
• Geopolitical Realignment: Rising distrust of China globally enables India to emerge as an alternate supplier.
• FTA Leverage: India’s Free Trade Agreements (FTAs) with UAE, EU, and ASEAN can enhance tariff-free access to major markets.
• Make in India Ecosystem: Policy support through PLI schemes, Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs), and chemical parks.
• Job Creation Potential: The sector could generate 7 lakh skilled jobs by 2030, particularly in petrochemicals, research, and logistics.

Persistent Challenges

• Feedstock Vulnerability: Over-dependence on crude oil and naphtha imports poses price and supply risks.
• Outdated Industrial Clusters: Legacy clusters lack modern safety systems, storage infrastructure, and waste treatment facilities.
• High Logistics Costs: Freight costs are 2–3 times higher than global averages, reducing export competitiveness.
• Regulatory Complexities: Absence of single-window clearances, frequent policy shifts, and inter-state inconsistencies deter investments.
• Weak Industry-Academia Linkages: Poor collaboration leads to low patent output and limited skill development.

NITI Aayog’s Recommendations

• Develop World-Class Chemical Hubs: Upgrade existing clusters and establish empowered committees. Suggested hubs: Paradeep, Dahej, Vizag. Introduce a dedicated Chemical Infrastructure Fund.
• Opex-Based Incentives: Offer operational subsidies linked to import substitution and export potential.
• Boost Technology Access & R&D:
  • Establish an industry-academia interface under the Department of Science and Technology (DST).
  • Enable technology transfer from global MNCs.
• Streamline Environmental Clearances:
  • Simplify processes via DPIIT audit mechanisms.
  • Ensure greater transparency and faster approvals.
• Strengthen Skill Development:
  • Expand and modernize ITIs and specialized institutes.
  • Introduce tailored courses in polymer science, green chemistry, and process safety.
• Negotiate Chemical-Specific FTAs:
  • Incorporate product-specific clauses.
  • Simplify rules of origin and documentation processes.