India is positioning its chemical industry for a bigger role in global manufacturing and supply chains as geopolitical realignment, China’s dominance and the weakening competitiveness of mature chemical-producing economies create opportunities for alternative production bases.
India is already the world’s sixth-largest chemical producer and third-largest in Asia, manufacturing more than 80,000 chemical products across bulk and speciality chemicals, agrochemicals, petrochemicals, polymers and fertilisers. The sector accounts for about 8.1% of the country’s manufacturing gross value added.
A FICCI-EY study, Catalysing India’s Chemicals and Petrochemicals: Strategies for Global Integration and Growth, estimates that India’s chemicals and petrochemicals (CPC) industry could grow to $383 billion by 2030 from around $250 billion currently and potentially reach $1 trillion by 2040. The industry is targeting a doubling of its global share by 2030.
The opportunity is being driven by rising domestic demand, relatively low per-capita consumption, expanding exports and the growing push by global companies to diversify supply chains beyond China.
China scales up as Europe loses ground
The global chemical industry is undergoing a structural realignment, with China continuing to add capacity while established producers in Europe, Japan and parts of North America face high costs, weak demand and excess capacity, note experts.
According to a Cefic Chemical Trends report, global chemical production grew 3.8% in 2025, but growth slowed to 1.5% in the first half of 2026. China’s chemical production grew 7.9% in 2025 and another 4.6% in January-June 2026. India recorded 0.6% growth during the first half of 2026.
In contrast, EU27 chemical production declined 2.4% in 2025 and another 1.6% in the first half of 2026. Germany contracted 3% in 2025 and 2.7% in the first half of 2026. Japan’s output fell 4.2% in the first half of 2026, while US production declined 2.1%.
Europe’s competitiveness is being hit particularly hard by energy costs. European gas prices averaged €45.1/MWh during January-July 2026, against €12.5/MWh in the US, making EU gas about 3.6 times more expensive.
Upstream chemicals remain under severe pressure, with production of other organic basic chemicals in the EU falling 9.2% in the first half of 2026 and polymers declining 6.5%. Some speciality and consumer segments have proved more resilient, with other chemicals growing 3.3% and cosmetics 1.3%.
The widening cost gap is creating an opportunity for countries such as India that can offer competitive manufacturing costs, a large domestic market and access to expanding global supply chains.
Speciality chemicals gain global growth
India accounts for only about 2.6% of global chemical sales, but ranks sixth globally in chemical production and exports chemicals to more than 175 countries. The US and China are among its major export destinations.
The country’s biggest opportunity may not lie in competing with China in commodity chemicals, where Chinese producers enjoy enormous scale and integrated supply chains, but in speciality chemicals, feel sector experts.
India has developed strong capabilities in agrochemicals, dyes and pigments, pharmaceutical intermediates and other speciality products. The segment competes on formulation, process technology, product quality, customer relationships and intellectual property rather than just manufacturing scale.
The FICCI-EY report projects an 11% compound annual growth rate for India’s specialty chemicals market during 2023-29.
“China-plus-one” strategies adopted by multinational companies could further accelerate the shift. Supply-chain disruptions, geopolitical tensions and growing concerns over excessive dependence on a single manufacturing location are encouraging global chemical companies to diversify production.
India’s large domestic market provides an additional advantage. Relatively low per-capita consumption of chemicals leaves considerable room for growth as industrialisation, urbanisation and incomes rise.
Chemical parks key to future growth
The government is seeking to strengthen the infrastructure needed to turn this opportunity into manufacturing capacity.
Union Minister for Chemicals and Fertilisers J.P. Nadda, while inaugurating India Chem 2026, said connectivity to ports, railways, airports and roads, along with integrated value chains, would be critical to developing globally competitive chemical manufacturing hubs under the government’s BHAVYA Rasayan scheme.
The scheme, with an outlay of ₹3,030 crore over five years from FY27 to FY31, is aimed at establishing large-scale chemical parks to boost domestic manufacturing and import substitution.
Production of selected major chemicals and petrochemicals has already risen from 45.64 million tonnes in FY16 to 58.62 million tonnes in FY25, a 2.8% compound annual growth rate.
Government-backed Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs) and Plastic Parks are also intended to provide common infrastructure, utilities and logistics for chemical companies.
The larger challenge, however, is to move beyond capacity creation and build integrated ecosystems—from feedstock and basic chemicals to intermediates, speciality products and downstream manufacturing.
India remains dependent on imports for several feedstocks, intermediates and petrochemicals. High logistics costs, fragmented production, regulatory complexity and inadequate R&D infrastructure remain constraints, according to the FICCI-EY study.