India's Chemical Industry on Track to Surpass $1 Trillion by 2040: Report Between fiscal years 2018 and 2024, the Indian chemical industry recorded a compound annual growth rate (CAGR) of approximately 10.5 per cent, outpacing the nation's GDP growth of 9 per cent during the same period.

India is on the verge of transforming itself into a global hub for the chemical industry, riding on its cost competitiveness and market attractiveness, according to a recent McKinsey & Company report titled, "Building Resilience for Global Leadership: The Path Forward for India's Chemicals Industry." Released in collaboration with the Indian Chemical Council (ICC), the report sheds light on India's promising trajectory in this high-growth sector despite macroeconomic challenges and global uncertainties.

The report highlights India's significant role in 16 speciality chemical sub-segments, including flavours, fragrances, food, and nutrition-based chemicals. With revenue growth remaining strong, even amid declining industry margins, the industry appears poised for long-term expansion. "Strong macroeconomic fundamentals, abundant talent, and India's low-cost manufacturing advantage position the industry for future growth," the report states.

A crucial takeaway from the study is the sector's resilience in the face of global economic pressures. Between fiscal years 2018 and 2024, the Indian chemical industry recorded a compound annual growth rate (CAGR) of approximately 10.5 per cent, outpacing the nation's GDP growth of 9 per cent during the same period. The paints and coatings segment, in particular, has benefited from industrial coatings, supported by the rising demand in consumer durables, automobiles, and allied industries. Similarly, segments such as flavours and fragrances, amines, adhesives, and sealants have experienced robust expansion due to product diversification and geographical outreach. However, not all sub-segments have fared equally well. Agrochemicals, plastic additives, surfactants, inorganics, dyes and pigments, and lubricants and fuel additives have grappled with revenue and EBITDA challenges.

One of the major factors driving growth in India's chemical industry is surging domestic consumption. The report notes that India's household consumption nearly doubled over the past decade, reaching $2.14 trillion in FY24. This trend positions India as the world's third-largest consumer market by 2026, with demand for chemicals in end-user industries such as cosmetics, automobiles, packaged food, and consumer durables reaching global scale. The consumer durables market alone is expected to grow to $60 billion by 2030, making India the fourth-largest player in the sector by 2027.

A key highlight was the release of a McKinsey report projecting the industry's growth to $1 trillion by 2040 Dr. Kartik Bharat Ram, president of ICC and joint managing director of SRF Ltd., spoke on the evolving landscape of the sector. "With rising domestic consumption, shifting supply chains, and competitive costs, the sector is poised for significant growth. Government support and technological advancements further drive this momentum," he stated.

Government support remains a key enabler in the industry's future trajectory. Nivedita Shukla Verma, secretary, department of chemicals & petrochemicals, Ministry of Chemicals and Fertilisers, addressed the conference, emphasizing the need for investment in research and development. She announced the approval of five new Centres of Excellence (CoE) and plans for three more, alongside a dedicated portal connecting 1,000 industries with 50 research institutions to foster industry-academia collaboration.

Deepankar Aron, joint secretary - chemicals, department of chemicals & petrochemicals, Government of India, underscored the sector's role in India's Viksit Bharat 2047 vision, aimed at achieving a $26 trillion economy and a per capita income exceeding $14,000. He highlighted key government initiatives such as Atmanirbhar Bharat, Make in India, and PM Gati Shakti, all of which will enhance India's global competitiveness in chemicals manufacturing and exports. India's chemical exports currently contribute 7% of the nation's total merchandise exports, amounting to $45 billion last year, with foreign direct investment (FDI) inflows nearing $20 billion over the past two decades.

Experts presented case studies on net-zero initiatives, including carbon capture, process automation, and sustainable feedstocks. The ministers were speaking at the 18th Annual India Chemical Industry Outlook Conference and Exhibition.