Abstract
As industries worldwide accelerate climate commitments, the chemical sector stands at a defining moment in its journey toward net zero emissions. With its deep integration across manufacturing, agriculture, pharmaceuticals, textiles, and infrastructure, the industry faces the dual challenge of reducing its environmental footprint while continuing to support global economic growth. The article explores how chemical companies are rethinking operations through cleaner production processes, renewable energy integration, circular economy practices, green chemistry innovations, and low-carbon feedstocks. It also examines the role of policy support, technology investments, and collaborative value chains in enabling a practical and scalable transition to net zero, while highlighting sustainability as a key driver of
long-term resilience and competitiveness.
Introduction
Though India’s chemical industry players are comparatively ahead of global peers in most performance parameters, multiple challenges confront the industry as it aims to
reduce its carbon footprint while simultaneously supporting economic growth.
However, collaborative measures by public and private players are poised
to transform India into a global chemical powerhouse in the years ahead.
Globally, industries have been accelerating climate change commitments. India’s chemical industry is also poised at a pivotal moment in its net-zero emissions journey. Given the chemical industry’s deep integration in pharmaceuticals, manufacturing, agriculture, textiles, infrastructure and other sectors, the segment confronts the twin challenge of curbing its environmental footprint even as it supports economic growth.
Consequently, chemical companies are reenvisioning operations with cleaner production processes, circular economy practices and green chemistry innovations while integrating renewable energy and using low-carbon feedstocks. Yet for these steps to succeed, they should be backed by conducive government policies along with timely technology investments. As it works towards net-zero emission objectives, the industry also needs to transition from fossil-based feedstock and chemical ingredients to bio-based, renewable or recycled alternatives. But this will not be easy as bio-based options can cost anywhere between 1.2 and 4.2 times more than fossil fuel alternatives.
The Current Chemical Industry Scenario
To better understand how this sustainability transition is happening, some elaboration is required via an industry overview. Currently valued at $260 billion, India’s chemical industry is anticipated to reach $383 billion by 2030, expanding at a CAGR of 10%. Burgeoning local demand, reformative policies and the preference for specialty chemicals are all spurring growth. But the ongoing reliance on imports should be brought under control and R&D spending intensified to tap global opportunities. Since it serves both national and international customers, India is perceived as a major player in the world chemicals market. This has given an immense fillip to the domestic industry’s global significance as chemical producers diversify supply sources beyond traditional hubs such as China. After the
post-pandemic supply chain disruptions and recent geopolitical issues, companies and countries across the globe are now using a China + 1 strategy to stabilise supplies.
However, as noted earlier, the country must reduce its heavy reliance on imports of certain high-value products and specific raw materials. An ISI Markets reports has cited recent trade data that indicates chemical imports stood at around $87.2 billion, surpassing exports of $68.1 billion. The trade imbalance highlights the urgent need for implementing import substitution policies, specifically in domains where the nation holds the technical prowess to boost production.
Here, it must be mentioned that the government’s ‘Make in India’ mission along with its RoDTEP (Remission of Duties and Taxes on Exported Products) scheme is meant to bridge the gap by incentivising indigenous manufacturing while boosting export competitiveness. Such targeted policy programmes can help in reducing the industry’s import dependence. Simultaneously, it could facilitate export opportunities in value-added products and specialty chemicals.
These measures are most welcome because specialty chemicals comprise an especially vibrant growth area in the overall chemical industry. Specialty chemicals cater to pharmaceuticals, agrochemicals, performance materials and allied sectors, while providing higher margins alongside lower vulnerability to volatility in commodity prices. Thanks to the bright prospects of specialty chemicals, local producers are investing more in R&D to boost sectoral expertise. These measures can help them garner greater market share and ascend the chemicals value chain.
Tracking the Sustainability Journey and Overcoming Inherent Challenges
Even as these moves play out, industry players are aware of the need to curb their carbon footprint. To reduce over-reliance on petrochemicals and curb the domain’s carbon trail, industry players should implement time-bound plans for a shift towards renewable raw materials. To promote circular economy goals, the RECEIC (Resource Efficiency and Circular Economy Industry Coalition) was created by the government in 2023. Further, a working group on Material Transition for the Chemicals Industry was formed to work on establishing a proper roadmap for the sector’s shift from virgin fossil fuels, which can promote a new sustainability standard.
One must admit, though, that some goals are easier said than done. Reducing reliance on fossil fuels is challenging as India’s manufacturing and other industries depend heavily on the same. Nonetheless, to meet India’s 2030 SDGs (Sustainable Development Goals) and zero emissions targets by 2070, every sector, including chemicals, needs to transform its sourcing and processing of raw materials.
The first step in this long journey requires the adoption of local bio-based options to move away from imported fossil fuels. The importance of this cannot be overemphasised since the country ranks as the third-largest global GHG (greenhouse gas) emissions contributor while chemicals and petrochemicals accounts for six percent of the world’s total.
How Collaborations Can Help in the Sustainability Transition
Accordingly, at the first RECEIC conference a white paper was released to address these hurdles. The white paper highlights insights to fast-forward the sustainability transition, with its focus on areas that need cross-industry cooperation. Among other means, the paper stressed research and technology pathways, particularly in the case of feedstocks like waste biomass and used cooking oil.
At this point, one should stress that a pan-India sustainability transition cannot be achieved in isolation by one or two companies or industries. Instead, it calls for a broad partnership across industries and a diverse spectrum of stakeholders to facilitate a faster transition to a sustainable future. The key role of collaborations is clear in the case of chemical supply chains that have multiple interdependencies. A collaborative effort is indispensable for success in the sustainability journey.
Operational and Structural Changes for Decarbonisation
Besides domestic compulsions, sustainable practices are imperative since global customers want more quality and transparency from their suppliers. Nationally and internationally, higher regulatory norms have nudged chemical companies to overhaul production processes by investing in green technologies and improving their compliance metrics to compete efficiently in overseas markets.
As a result, domestic chemical companies are adopting several operational and structural transitions in their decarbonisation journey. These include biomass utilisation and material transition by shifting from legacy petrochemicals and blending bio-based options linked to biomass. Integrating green energy, mainly for power-intensive processes like producing green ammonia and green hydrogen. Promoting circular economy practices such as advanced plastic recycling, expansion of EPR (Extended Producer Responsibility) and r-PET (recycled polyethylene terephthalate) plants.
Despite a challenging landscape, the domestic chemical industry is in a better position compared to global peers. While chemical producers in other nations are battling falling prices and low demand, Indian players have several advantages that help them grow. Apart from many buyers in its vast local market, the operational costs of running enterprises and manufacturing in India are much less. The demand for chemicals, agrochemicals and specialty chemicals is driving demand throughout the year. The rising use of packaged foods and beverages, the countrywide infrastructure push and the advent of electric vehicles, semiconductors and clean energy requirements are all necessitating increasing use of chemicals.
Addressing the Trade Deficit and Other Issues
Nevertheless, a new report by McKinsey states that India holds a trade deficit of $31 billion in the chemical segment. In other words, the nation is buying more chemicals from abroad than it is selling. Yet market analysts believe that the tremendous trade deficit offers an immense opportunity for domestic chemical companies. By building local production capacity for inorganic chemicals and polymers, the domestic dependence on expensive imports can be reduced. Over the long run, this will also lower costs and boost the competitiveness of domestic firms against global players.
Contributing to 7% of its GDP, India’s chemical industry is ranked the third largest in Asia and the sixth largest in the world. In its report – Chemical Industry: Powering India’s Participation in Global Value Chains – released earlier, NITI Aayog provides an in-depth analysis of the domestic chemical market. The report reveals opportunities plus challenges, while charting a pathway to position the country as a pivotal player in the world’s chemical markets.
The report notes that the global chemical industry is experiencing a huge transformation because of shifts in supply chains, demand for specialty and green chemicals and an intense focus on innovation and sustainability. Notwithstanding positive features such as its GDP contribution and market size, the local chemical segment remains fragmented, while being restricted by regulatory inefficiencies, infrastructure shortfalls and minimal R&D outlays. The country’s 3.5% share in the world’s chemical value chains and its $31 billion trade deficit underlines its big dependence on imported specialty chemicals and feedstock.
However, select reforms covering a broad spread of fiscal and non-fiscal initiatives could help India emerge as a $1 trillion chemical industry with 12% global value chain share by 2040, turning the nation into a worldwide chemical hub. But reaching this goal needs concerted efforts from both the Central and state governments as well as industry stakeholders.
Conclusion
NITI Aayog’s vision document is confident that collaborative measures will help wipe off the chemical industry’s trade deficit, generate new exports of $35-40 billion and create more than 7,00,000 new skilled roles. Supported by conducive policy measures, NITI Aayog is confident that India can emerge as global chemical powerhouse well before its Viksit Bharat@2047 deadline. Ultimately, the right blend of public and private initiatives can help transform the domestic chemical industry from an import-dependent entity into an exporter of specialty chemicals. All it requires is coordinated efforts to make this dream a ground reality at the earliest.
BIO
Dr. Amitt Nenwani, Managing Director of Shivtek Spechemi, brings 25+ years of chemical industry leadership, driving global expansion, sustainable manufacturing, green chemistry, smart manufacturing, digital transformation, operational excellence, and innovation through strong technical and strategic expertise.
