The Indian chemical industry is poised for growth, driven by domestic demand, export potential, and the China+1 strategy. India is the sixth-largest chemical producer globally and third in Asia, contributing 7% to India’s GDP and employing over 2 million people. The industry, valued at approximately $220 billion in 2023, is a significant contributor to the economy, projected to grow to $383 billion by 2030 and $1 trillion by 2040, with a CAGR of 9.3%.

The "China+1" strategy has positioned India as an alternative manufacturing hub due to supply disruptions in China caused by environmental regulations and geopolitical tensions. As per the estimate, over 60% of petrochemical feedstock is imported, making the industry vulnerable to price fluctuations and supply chain disruptions. This dependency, particularly on China for 85-90% of certain chemicals like APIs, contributes to a $9-10 billion trade

deficit, which is projected to grow to $40-42 billion by 2040. India’s chemical exports contributed 10% of total exports in 2023-24 (up to December), with a CAGR of 7.7% from 2018-19 to 2022-23.

However, its supply chain and logistics face several challenges and opportunities, shaped by domestic demand, global trends, and policy support. Logistics costs, including transportation and storage, remain a significant challenge, impacting profit margins. Fluctuating freight costs, up 15-20% due to longer routes, fuel costs, and insurance, have affected exports, particularly in pharmaceuticals and agrochemicals. Air freight costs have risen 7-8 times due to restricted airspace in Pakistan and Iran, disrupting trade routes.

Moreover, inadequate logistics infrastructure, such as chemical storage facilities, rail/road connectivity, and port proximity, hinders efficiency. The industry requires global-scale infrastructure to remain competitive.

Investments in PCPIRs, digitalization, and sustainable logistics practices will be critical to overcoming infrastructure and cost challenges. Collaboration between industry, logistics providers, and the government is essential to address regulatory hurdles and ensure safe, efficient supply chain.

In summary, while the Indian chemical industry benefits from strong growth prospects and policy support, addressing logistics costs, infrastructure gaps, and import dependency will be crucial to sustaining its trajectory toward becoming a global manufacturing hub by 2040.