India’s share in the global chemical value chain is likely to triple over the next 15 years, driven by a stable government at the Centre, favourable manufacturing policies, and low production costs, according to the latest findings by global consultancy firm KPMG. The growth of the Indian chemical industry is also being fuelled by geopolitical uncertainties, which are prompting overseas buyers to reduce their dependence on China for raw material procurement and seek alternative suppliers capable of offering quality products at competitive prices.
The latest KPMG study, released on Friday, states, “India’s current integration into global chemical value chains remains limited, with an estimated market share of around 4 percent. This indicates significant headroom for expansion. The global chemical industry is undergoing a structural realignment driven by geopolitical tensions, supply chain disruptions, and increasing risk diversification strategies. In this context, India is emerging as a potential anchor in global supply chains. It is estimated that India could increase its share of the global chemical market to around 11 percent by 2040, supported by targeted industrial policies and ecosystem development.”
Global supply chain anchorIndia’s emergence as a global supply chain anchor will depend less on low-cost manufacturing and more on its ability to build globally competitive production ecosystems. The country’s vast industrial base, supported by robust domestic consumption, provides a strong foundation for expanding manufacturing capacity across a wide range of sectors. As the world’s sixth-largest chemical producer, India has a well-established platform to strengthen downstream industries such as pharmaceuticals, agriculture, construction, textiles, and consumer goods, enabling greater value addition and enhancing industrial resilience.
However, India’s relatively limited presence in global chemical trade suggests that manufacturing scale alone is insufficient to secure a larger role in international supply chains. To emerge as a preferred global manufacturing and sourcing destination, the country will need to translate its domestic strengths into sustained export competitiveness through improved product quality, reliable supply chains, efficient logistics, and adherence to global standards. By offering consistency, resilience, and supply chain diversification, India can position itself as a dependable alternative in global value chains rather than competing primarily on the basis of lower production costs.
Inflexion pointIndia's chemical sector is at a strategic inflection point, underpinned by strong domestic demand, favourable geopolitical shifts, and sustained policy support aimed at boosting manufacturing. Global efforts to diversify supply chains away from concentrated sourcing destinations have also created a significant opportunity for India to expand its footprint in the international chemicals market. With a large domestic consumer base and a growing industrial ecosystem, the sector is well positioned to attract fresh investments and strengthen its role in supplying key raw materials and intermediates to a broad range of industries.
However, translating these favourable conditions into long-term global competitiveness will require addressing several deep-rooted structural challenges. The sector continues to grapple with infrastructure gaps, dependence on imported feedstocks and critical raw materials, and regulatory inefficiencies that increase operating costs and heighten supply chain vulnerabilities. These constraints undermine manufacturing efficiency, limit export competitiveness, and expose producers to external disruptions. Overcoming these bottlenecks through improved logistics, stronger domestic supply chains, and policy reforms will be critical to enabling India to establish itself as a resilient and reliable global chemical manufacturing and supply hub.
Market sizeThe KPMG study further states that India's chemical industry is poised for significant long-term expansion, with its market size projected to nearly quadruple from US$ 258.3 billion in 2025 to around US$ 1 trillion by 2040, reflecting a robust compound annual growth rate (CAGR) of 9.6 percent. The sector remains a critical pillar of the country's manufacturing ecosystem, contributing approximately 7 percent to India's GDP while supplying essential inputs to industries such as pharmaceuticals, agriculture, automotive, construction, textiles, and consumer goods. This growth trajectory underscores the industry's increasing strategic importance in strengthening India's industrial base and enhancing its role in global supply chains.
Investor confidence in the sector also remains strong, supported by rising capital inflows and favourable policy initiatives. The chemicals and petrochemicals sector attracted around US$ 1.06 billion in foreign direct investment (FDI) in 2025, reflecting growing global interest in India's manufacturing potential. As multinational companies continue to diversify their supply chains and reduce dependence on single-country sourcing, India's expanding domestic market, improving industrial capabilities, and supportive policy environment position the chemical industry to emerge as a major global manufacturing and export hub over the coming decades.
Supply chain diversificationGlobal companies are increasingly diversifying their supply chains to reduce overdependence on specific geographies. This trend is particularly relevant in the chemicals sector, where concentration risks in upstream supply chains have been exposed in recent years. However, the industry remains fragmented, with limited integration across value chains. India’s emergence as a global supply chain anchor will be driven primarily by its manufacturing scale and policy support, complemented by cost advantages.
Strong domestic demand and integrated end-use industries provide the scale needed to support growth, while policy initiatives such as Petroleum, Chemicals and Petrochemicals Investment Regions (PCPIRs), Production-Linked Incentive (PLI) schemes, and the National Logistics Policy are fostering ecosystem development and improving operational efficiency. However, cost competitiveness alone is insufficient, as logistics account for around 8 percent of GDP, weighing on overall efficiency. India’s ability to translate policy initiatives into large-scale execution will ultimately determine whether it can evolve from a cost-competitive manufacturing base into a resilient and globally integrated supply chain hub.
Import dependenceIndia’s chemical supply chain continues to face a fundamental structural constraint—its heavy dependence on imported feedstocks and intermediates. Despite strong domestic demand and expanding downstream capabilities, the sector remains heavily reliant on global supply chains for critical raw materials, particularly petrochemical derivatives and specialty inputs. This dependence has resulted in a persistent trade imbalance, with the chemical trade deficit estimated at approximately US$ 31 billion in 2025, underscoring the extent of the industry's import reliance.
At a structural level, India remains significantly dependent on imported petrochemical intermediates and key feedstocks, exposing the industry to global supply chain disruptions and price volatility. A critical aspect of this vulnerability is the concentration of sourcing across a limited number of geographies. India imports a substantial share of its chemical intermediates from a few regions, particularly China and parts of West Asia. One of the key drivers of this structural dependence is the lack of adequate backward integration within the country's chemical ecosystem.
While India has developed strong capabilities in downstream manufacturing and formulations, investment in upstream petrochemical capacity and feedstock production has not kept pace with growing demand. This imbalance limits the ability of domestic manufacturers to secure critical inputs locally and weakens the sector's resilience during periods of global disruption.
Although investments are being made to strengthen upstream capacity, it will take time for these projects to become operational. Until then, India's chemical supply chain will remain vulnerable to external shocks. This structural imbalance also constrains the country's ability to establish itself as a reliable global supplier, as upstream disruptions can quickly cascade through downstream production, resulting in higher costs, supply uncertainties, and reduced competitiveness in international markets.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
