Rediscovering the growth path in the chemical industry

Rediscovering the growth path in the chemical industry

by avachem, April 26, 2019

Industry size and growth estimates: Indian chemical companies constitute a highly diversified and sizeable industry that includes agrochemicals, commodities, polymers, specialty chemicals and a variety of other groups. Net chemical sales are expected to rise from USD 139 billion in 2014 to USD 214 billion by 2019. By 2025, the industry is projected to reach USD 403 billion. Among the most diversified sectors, chemicals cover an array of over 80,000 commercial products.

At present, India’s chemical industry is one of the fastest growing in the world. It is currently ranked as the third largest in Asia and the sixth largest globally with respect to output after the US, China, Germany, Japan and Korea.

The domestic chemical sector has continued its run of strong performance in Q1FY19 with a favourable increase in volumes. The uptick in numbers is due to increasing competency of Indian players across the globe as the Chinese chemical market continues to reel under the effects of disruption. Indian chemical players stand to benefit from both strong commodity chemical prices and high demand volumes globally and the Indian chemical industry is well poised to grow rapidly in both capability and size.

Positive drivers for 2019

Growing demand: One of the strongest drivers India’s economy is its population that is rapidly becoming larger, younger, with a growing purchasing power and an increasingly urban taste. These demographic trends are driving an increased demand for appliances, automobiles, clothing, healthcare items, housing, etc. In fact, by 2030, India is expected to have more people than China. 
Improved Ease of Doing Business: The government has introduced a number of reforms aimed to encourage business growth by eliminating unnecessary hurdles, simplifying bureaucratic processes, and making the government’s role more transparent, accountable and responsive. This has resulted in a significant rise in India’s ranking on the World Bank’s Ease of Doing Business (EoDB) Index.
Skilled talent pool: However, major challenges remain for the Indian chemical players. The industry is highly fragmented with intense competition among companies. Due to 100 percent FDI allowance, domestic players have to go up against foreign multinationals that have deep pockets to exert strong price pressures on local markets. Significant capital requirements, R&D costs, patent protection and personnel requirements present other challenges. But for every challenge there is an equal if not greater opportunity.
 There is an abundance of skilled human resource in India, who can be employed by the industry to keep the growth momentum. Specialty chemicals and pharmaceuticals segments in particular are projected to outgrow the overall chemical industry growth rate.
 The chemical sector is expected to double to US$ 300 billion by 2025, clocking an annual growth rate of 15-20 per cent. To achieve this, the Indian government is also working on a draft chemical policy that will focus on meeting the rising demand for chemicals and reduce imports.
 More than 50 per cent of companies intend to increase hiring in 2019, while only 3 per cent firms may reduce the headcount according to Mercer’s employers’ survey. The hiring outlook is definitely positive. While hiring in some sectors has seen a slowdown due to falling demand, hiring in the chemical sector continues to go strong according to the recent monthly Naukri JobSpeak Index reports.

Key hiring trends

Going digital: With the onset of industry 4.0, Indian firms are reinventing themselves for the digital age. However, they are just as challenged as their global counterparts due to the mismatch between current skill sets of employees and potential hires versus those needed for the future. Businesses are keen on taking advantage of emerging technologies such as AI, digital communications, IoT and Robotic Process Automation (RPA) to improve collaboration, competitiveness and margins. Firms are proactively preparing their workforces for the future by hiring, skilling and even re-skilling if required.
Gender parity a priority: Global chemical companies such as PPG Industries and Akzo Nobel Coatings have introduced policies to make it mandatory for equal pay regardless of gender across their operations. At the same time, globally, governments are passing laws to encourage gender parity. Indian firms too are proactively setting targets and hiring women engineers to improve their gender ratio as not having a diverse workforce can be detrimental to business. 
Emphasis on R&D: With Indian companies emerging as major global players globally, the country is witnessing an uptick in the emphasis on research and development. In fact, for Pharmaceuticals, India is on track to become a powerhouse of R&D and manufacturing. Increasing opportunities for research work are available as well as profiles related to the industry from other fields. India already has a wide array of top tier institutes such that can supply the talent required for these roles.
 Almost 58,000 additional job opportunities are likely to be created as the Pharma industry alone, which is expected to grow up to 45 per cent by 2025 driven by domestic sales, exports, an ageing population, increase in per capita spending and medical tourism.
Having the right talent will be key:In order to build brands, firms will also be looking at importing talent and skills from outside the industry. This will open doors for cross-pollination of talent from other sectors who will bring newer approaches and ideas for the sector. 
 AVA Chemicals is one of the largest chemicals contract manufacturing company in India. We have been formulating and providing premium-grade chemicals to national and international clients in over 20 countries. We supply processed ingredients, utilities and equipment to Indian players. In time, AVA Chemicals has progressed to become an accredited supplier of services to chemical firms among its other offerings. With a solid value chain in place, AVA Chemicals is a trusted provider for leading companies such as BASF, Castrol and Tata Chemicals among others. It aims to be known as an ethical company providing chemicals to companies who manufacture products that are used in day-to-day life, thus touching the lives of millions of people. 
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