India Poised To Become A Global Chemical Supply Hub: McKinsey Report

India is on track to become a global chemical supply hub, driven by cost competitiveness and market appeal, according to a McKinsey & Company report in collaboration with the Indian Chemical Council. The report highlights 16 specialty chemical sub-segments, including flavours, fragrances, and food & nutrition-based chemicals, as key contributors.

Despite economic pressures and shrinking industry margins, revenue growth remains strong. The report states that India’s strong economy, skilled workforce, and low-cost manufacturing will drive future expansion.

Chemical Industry Grows Faster Than GDP

India’s chemical industry revenue grew at a CAGR of 10.5% from FY18 to FY24, outpacing the 9% GDP growth during the same period. This growth shows the sector’s resilience and potential.

Segments like paints, coatings, flavours, fragrances, amines, adhesives, and sealants saw strong expansion. The paints and coatings industry benefited from rising demand in consumer durables, automobiles, and allied industries, with industrial coatings contributing 30% of total revenue.

However, the amines industry faced profit losses due to volatile raw material prices. Other segments, including agrochemicals, plastic additives, surfactants, dyes, and lubricants, recorded weak revenue and low EBITDA performance.

Rising Domestic Demand Fuels Growth

India’s household consumption nearly doubled in the last decade, reaching $2.14 trillion in FY24. Experts predict India will become the world’s third-largest consumer market by 2026.

Demand for chemicals in cosmetics, automobiles, packaged food, and consumer durables continues to grow. The consumer durables sector is set to reach $60 billion by 2030, making it the fourth-largest industry by 2027.

India’s chemical industry will play a crucial role in economic growth as the country expands its manufacturing base and strengthens its supply chain.