Over the past few years, the Centre has stressed the importance of an Atmanirbhar Bharat (self-reliant India). Against this backdrop, the reported decision of the Central Insecticides Board to prioritise molecules discovered in India is most welcome. Considering that many chemicals, typically patented products, were imported, this represents a significant shift that can transform the Indian chemicals industry, nurturing innovation and curbing dependence on imported solutions.
Of course, the criticality of increased innovation and R&D efforts in producing patented molecules cannot be overlooked. The challenge is daunting when one realises that multinational companies have extremely deep pockets, greater scientific resources and established markets at their disposal, unlike domestic firms that face varied constraints.
Understanding the multiple hurdles
Besides financial issues, Indian innovators confront logistics hurdles in developing and marketing novel molecules. Additionally, stringent norms and other regulatory hurdles only inflate their overall cost of compliance.
To elaborate, the introduction of new active ingredients in the domestic market only happens after a prolonged, expensive process that requires a decade at the least while adhering to the highest safety and efficacy standards. The R&D in chemicals also confronts unknown, unforeseen barriers, including various ecological issues.
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Despite such constraints, the role of chemicals in transforming modern agriculture and the home-care market cannot be overstated. For example, crop protection chemicals have been boosting agricultural productivity and promoting food security.
During every sowing season, crop protection is the topmost concern of farmers since weeds, pests and other types of disease infestation pose major productivity challenges. With the right crop protection chemicals, farmers can combat insects, pests and diseases to raise yields substantially. The increased productivity means more income for farmers and higher revenues for the country.
National and international scope
Be it agriculture or home-care products, chemicals play an important role. Valued at $220 billion in 2023, India’s chemicals market is projected to reach $383 billion by 2030.
This growth will be propelled at an estimated CAGR of 8.1 per cent between 2021 and 2030. As the world’s sixth-largest chemical market by sales, the nation has attracted substantial foreign direct investments with overall FDI inflows touching $21.7 billion between April 2000 and September 2023.
This has been facilitated by 100% FDI through the automatic route. The chemicals industry adds 12% to India’s overall exports, emphasising its significant role in the global market.
Barriers and opportunities
Even though attempts have been made to promote its growth, the chemicals industry deals with many challenges. Since the industry still relies on imports to address raw material availability issues, supply disruptions and price fluctuations affect its bottom line.
The constant pressure to innovate and upgrade products to stay in sync with global peers and meet evolving consumer needs forces companies to allocate higher R&D outlays. Moreover, strict environmental regulations only heighten the compliance burden, making it difficult to scale up operations.
Nonetheless, several opportunities exist due to growing domestic demand, favourable government policies, together with openings for innovation, collaboration and exports. Demand in home care, agrochemicals, pharmaceuticals and other end-user industries has been rising steadily in recent years.
As for government support, this includes subsidies, tax incentives as well as simplification of rules and regulations. The export potential is highlighted by India’s low manufacturing costs and high quality of products. A slowdown in China’s manufacturing industry has also presented an opportunity for India to grab a larger share of the world market.
Similarly, public-private partnerships and collaborations with international firms can help domestic companies remain competitive in the global marketplace by enhancing product offerings. Such tie-ups could also help in advancing innovation and R&D efforts through greater investments.
This can boost the possibility of discoveries customised according to local agricultural conditions, pest challenges and home-care requirements. A greater focus on domestic production will ensure less use of imported chemicals, providing consumers with products at lower prices. Domestic production can also advance the development of eco-friendly products and safer chemicals prepared as per Indian needs.
Ultimately, it will also lead to more job creation in the research and manufacturing segments. According to projections, employment generation in the chemicals industry is poised to reach one million in 2024.
The availability of skilled resources at competitive costs alongside conducive government policies makes the domestic chemicals industry a favourable investment destination. While India’s chemicals industry does face some challenges, it is clear that the overall advantages and growth opportunities far outweigh its downsides.
The author is Founder-Director – Safex Chemicals