18 Aug 2025
Chemicals are the building blocks of everything around us. Chemicals are in the products you use every day. From fertilizers that grow our food to pharmaceuticals that keep us healthy, from personal care products to the paints that colour our world—chemicals shape modern life. In fact, more than 96% of manufactured goods are directly enabled by the chemical sector.
Source: Asian Market Securities, as per latest data available
Broadly chemicals fall into 2 groups:
Organic Chemicals are Compounds primarily made of carbon and hydrogen atoms. Eg: - Petrochemicals like propylene, benzene, etc.
Applications range from plastics and synthetic fibres to pharmaceuticals and solvents.
Inorganic Chemicals are Compounds that do not contain carbon-hydrogen bonds. Eg: - Ammonia, sodium hydroxide, etc.
Applications can range from fertilizers, water treatment, construction, electronics, and food processing, etc.
The Chemical sector can also be bifurcated into commodity chemicals which are low value, high volume and specialty chemicals which are high value, low volume, with more customised applications and higher manufacturing costs.
In 2003, the European Union and the United States together accounted for ~57% of the global market share, while China held just ~9%. However, in 2023 China dominates the World Chemical Sales with ~43% market share. Such Global leadership shifts present India with an opportunity to strengthen its share in chemicals which is at ~3%.
Source: CEFIC Facts & Figures report. *For 2003, 26% share indicates North American Free Trade Agreement as a whole, As per latest data available
Why the Indian Chemical industry may see a rise?
The Indian chemical industry has been benefiting from supply chain disruptions in China, which began in 2015 when the Chinese government imposed strict environmental regulations. This was further intensified by the US-China trade war and the Covid-19 outbreak, creating strong tailwinds for Indian manufacturers. These disruptions triggered the China+1 strategy, prompting global MNCs to de-risk their supply chains and shift manufacturing bases away from China. Indian companies have capitalized on this opportunity by scaling operations and strengthening technical and R&D capabilities. Government initiatives like Aatma Nirbhar Bharat further reinforced this momentum, positioning the chemical sector at the forefront of self-reliance. With robust technical expertise and strong R&D setups, Indian chemical companies are increasingly becoming preferred partners for global MNCs.
Additionally, growing urbanisation and rise in manufacturing would also drive the domestic demand for chemicals.
Pharmaceuticals provide a large opportunity for the sector with Indian CDMO (Contract Development and manufacturing organization) market share rising due to the cost advantage offered by Indian CDMOs. The agrochemicals segment is expected to recover cyclically as global inventory levels normalize, and margins may rebound from multi-year lows. Additionally, China’s anti-involution policy aims to curb excess capacity and price wars, potentially easing global supply pressure and benefiting Indian chemical exports.
India remains well-positioned to capitalise on this trend, backed by its cost-efficient labour force, supportive policy environment, and steady inflow of investments, however several risks require proactive management. Export competitiveness may be affected by overcapacity in China, elevated US tariffs (though pharma and some agrochemicals are currently exempt), a global economic slowdown, limited availability of key feedstocks, and the sector’s vulnerability to industrial accidents
These factors contribute to the sector’s inherent cyclicality. Despite this, the chemical industry has outperformed in the last 10 years. The Indian chemical sector is poised for substantial expansion, with specialty chemicals leading the charge. The industry is expected to reach US$ 1,000 billion by 2040 at a CAGR of 9.5%, driven by rising demand in end-user segments.
Source: NITI Aayog Chemical Report, July 2025
With valuations for specialty chemicals near the long-term average and India’s global market share on the rise, specialty chemicals are well-positioned to spearhead the next phase of industrial transformation.
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