Increased investment on research and development (R&D) would enhance India’s global competitiveness in the chemical sector. Currently, India has a minuscule investment in R&D of just 0.5 per cent of the industry’s overall sales of Rs 5,50,000 crore ($100 billion). But, by 2017, the industry requires to increase its R&D spends to four per cent, experts said on the sidelines of a valedictory function of the stalwarts of the industry here.
The R&D spends by chemical manufacturers in India currently stand at very low levels. But, the overall spend is set to rise a massive Rs $12 billion by 2017, said Yogesh M Kothari, president of the Indian Chemical Council (ICC) and CMD of Alkyl Amines Chemicals Ltd.
With Asia’s growing contribution to the global chemical industry, India is emerging as one of the focus destinations for chemical companies worldwide. With the current size of approximately $108 billion, the Indian chemical industry accounts for around three per cent of the global chemical industry. Two distinct scenarios for the future emerge, based on how effectively the industry leverages its strengths and manages challenges. In the base case scenario, with current initiatives of industry and government, the Indian chemical industry could grow at 11 per cent to reach the size of $224 billion by 2017.
However, the industry could aspire to grow much more and its growth potential is limited only by its aspirations. In such an optimistic scenario, high end–use demand based on increasing per capita consumption, improved export competitiveness and resultant growth impact for each sub-sector of the chemical industry could lead to an overall growth rate of over 15 per cent and a size of $290 billion by 2017 (around six per cent of global industry). This has a potential for further upside in the future considering India’s increasing competitiveness in manufacturing.
On the export front, India’s performance, however, is likely to remain lower due to the ongoing slowdown in the European economies.
According to R Parthasarathy, managing director of Thirumalai Chemicals Ltd, the slowdown in the European economies has a muted response.
According to the government’s Five Year (2012-17) Plan, compared to the developed world (the US and Europe) or China, the current penetration of specialty chemicals within India’s end markets is low. With increased focus on improving products, usage intensity of specialty chemicals within these end markets will rise in India over the next decade.
The usage of pesticides in India is 0.58 kg/hectare (ha) compared to two kg/ha in China. To meet India’s food requirements – spurred by increasing population, rising income and limited availability of arable land – the yield per hectare will need to be increased considerably (example, crop productivity in India is at two MT/ha compared to China at five MT/ha). This can be achieved through multiple means (example, larger fields, better automation and improved irrigation infrastructure), along with increased use of agrochemicals.
Investments in manufacturing in the chemicals sector are absolutely essential to ensure growth of the Indian chemical industry, Parthasarathy said.
Focussed growth and planning for the chemicals sector would enhance India’s global competitiveness further, increase domestic value addition, provide technological depth and promote sustained economic growth. In order to realise the growth envisaged above and leverage the India opportunity effectively, the chemical industry would require significant investments in capacity creation, technology development, access to feedstock and a larger pool of skilled human resources.
