Gujarat’s Chemical Industry Drives India’s Economic Rise

The Indian chemical industry is highly diversified and covers over 8,000 commercial products. According to the National Investment Promotion & Facilitation Agency, Chemical and Chemical products-based sectors contribute approximately 8% of India’s GDP. Out of the various states, Gujarat’s chemical industry alone contributes 53% of India’s chemical manufacturing and export.

The western states of Gujarat have some of the biggest names in the Petrochemicals and chemicals industry, like Reliance, which grew at a CAGR of 10-11% in the last few years. Since these states have various business-friendly policies and robust infrastructure for chemical manufacturing, it is vital to compare this emerging chemical hub of India with other prominent world’s giants like Saudi Arabia.

According to McKinsey & Company, the Indian chemical industry is projected to grow at a Compound Annual Growth Rate (CAGR) of 7-10%  during 2021-27. Today, India ranks 6th in the world and 3rd in Asia as a chemical producer, out of which Gujarat contributes more than 30% of the chemical’s production and exports.

Gujarat’s chemical industry contributes 62% of petrochemical production, 53% of chemical production, and 45% of pharmaceutical production. It is also positioned as the ‘Petrochemical and Chemical Capital of India and has a marginal role in the growing economy of India. 

Amid the global crisis of war between Russia-Ukraine and now Hamas-Israel, the world’s economy is disrupted. However, Gujarat and other states of India continuously receive support from the Indian government via the Production Linked Incentive Scheme(PLI) and other schemes. In addition, the Tata Strategic Management Group report also highlighted stellar growth of Gujarat’s chemical industry in the last five years, which will act as a pillar towards India’s economic growth in the next five years.

A Sneak Peak At Gujarat’s Chemical Industry Growth

Gujarat has rapidly developed and emerged as India’s chemical hub in the last five years. While addressing the national conference in Ahmedabad, Gujarat, Susanta Kumar Purohit, joint secretary, Department of Chemicals and petrochemical said, “The chemical industry will get an investment of Rs 8 lakh crore by 2025 and will grow at the rate of 9.3 per cent.”

During the conference, Purohit also highlighted the government’s plans to accelerate the growth of Gujarat’s chemical sector by infusing new funds and bringing global investments. Currently, Gujarat has over 11,000 chemical units, which can produce 3-4 million tonnes of chemicals and satiate the high export demand.

Apart from this, India’s finance minister, Nirmala Sitharaman, has already announced that the government will provide incentives to domestic chemical entities. Under the Production Linked Incentive Scheme(PLI), the government will focus on the specialty chemical segment with the highest domestic and international demand.

Gujarat’s Role In India’s Global Growth In Chemical Industry

The global chemical industry dynamics favoured India and encouraged chemical companies in Gujarat to turn their insights towards future opportunities in this sector. During the Global Chemicals and Petrochemicals Manufacturing Hub in India, organised in July 2023, Gujarat also received an investment of Rs 1,401 crore. Since this sector contributes substantially to India’s economic growth, it might make India the key supplier to diverse industries like textiles, agrochemicals, and pharmaceuticals globally. 

Opportunities & Challenges For Gujarat

India consistently ranks third in chemical imports and fourth in exports over the last five years. It signifies that cities like Gujarat significantly contribute to managing the country’s inclusive trade flow. In recent years, safety and environmental problems have plagued various chemical companies in countries like China, forcing regulatory authorities to crack down on erring companies and compromise the quality and safety of chemicals. To de-risk dependence on one country, MNCs are looking to source chemical products from the western states of Gujarat. 

The significant challenges for Gujarat’s chemical industry are inadequate infrastructure, high cost of raw materials, capital, and limited availability of technological modernization of chemical plants.

Gujarat- India’s Next Chemical Manufacturing Hub

The chemical industry, a consistent contributor to India’s economic growth, remains an attractive hub for global opportunities. Gujarat, the state which is backed by the central government is expected to contribute marginally in the coming years as it has the largest chemical units and much-needed technologies and infrastructure to manufacture different chemicals. Various reports and global market conditions also favour Gujarat’s position as India’s next largest chemical manufacturing hub and contribute towards the country’s economic growth.

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