A Defining Moment for Indian Manufacturing
The change in India’s chemical industry is transforming at a breakneck speed. Due to its extensive industrial base, India is being considered a key player in the international chemical value chain. In addition to this, global demand is shifting from China to India and other manufacturing hubs. However, with estimates suggesting that the Indian chemical industry could reach up to $1 trillion by the year 2040—and possibly even double that—the question arises whether India is fully prepared to embrace the $2 trillion chemical economy?
This projection is not just an industrial benchmark. It provides Indian startups, MSMEs, and investors with strategic directions to establish a prominent position in one of the most rapidly evolving and diverse sectors. It is critical to note that immense potential comes with a host of new challenges. Here, the complex structure of the sector’s demand, production models, technology landscape, regulatory ecosystem, and ever-changing regulatory environment must be considered as well.
Foundations of India’s Chemical Understanding
Covering a range of basic chemicals alongside petrochemicals, India’s chemical industry is sector is one of the country’s most important industries. Examples of the products the industry serves include agrochemicals, polymers, and specialty formulations. This industry also enables the growth of many downstream sectors which feature agriculture, automotive, pharmaceuticals, food processing, construction, and textiles.
The chemical industry supports India’s economy significantly, contributing about seven percent (around $240 billion) of the GDP alongside having more than 80,000 commercial products. The sector is heavily integrated with the global supply chain and receives a lot of foreign investment (FDI), showing that it also has potential for overseas consumption. India is increasingly being viewed as a processing and exporting center for chemicals.
Estimates suggest that the world will have an unprecedented demand for chemical products, opening the door for India to become one of the leading manufacturing powerhouses. Digitization, as well as sustainability initiatives from the government, are a big help in this vision. Although there are foundational gaps that need to be addressed, I believe reaching a $2 trillion goal is ambitious but achievable.
Related: How to Launch a Specialty Chemical Manufacturing Unit in India: Opportunities and Challenges
Key Components to Driving Growth
China+1 Strategy
India will benefit from being a low-cost manufacturer. As geopolitical tensions rise around China, many companies are shifting away from Chinese chemical suppliers. India is quite favorable due to its strategic location and cost competitiveness which makes it a prime candidate as a receiving country.
Domestic Demand Expansion
The need for construction and modernization fosters great demand for chemicals, multiplied by other growing sectors such as electronics and agriculture. The chemical value chain also benefits from sustained demand from the health sector, enabling even more expansion for the chemical industry.
Government Policy Support
Comprehensive policy reform such as 100% FDI allowance, development of industrial corridors, and regulatory streamlining is motivating both large and startup ventures.
Specialty Chemicals Export Surge
India is now poised to specialize in niche and value-added chemicals, leading to rapid growth in exports, which are projected to reach over 10% CAGR in the next five years.
Five-Year Demand Projections: India’s Chemical Industry Growth Outlook
For entrepreneurs, it is essential to dig deeper beyond marketing slogans to understand market evolution in order to glean the scope of opportunity. Using secondary research and industry trends, we present projected demand estimates of key chemical segments over the next five years.
| Chemical Segment | 2025 (₹ Cr) | 2026 (₹ Cr) | 2027 (₹ Cr) | 2028 (₹ Cr) | 2029 (₹ Cr) |
| Bulk Chemicals | 520000 | 565000 | 615000 | 670000 | 730000 |
| Petrochemicals | 410000 | 460000 | 515000 | 580000 | 650000 |
| Specialty Chemicals | 390000 | 450000 | 525000 | 620000 | 725000 |
| Agrochemicals | 120000 | 135000 | 150000 | 165000 | 180000 |
| Dyes and Pigments | 80000 | 92000 | 105000 | 120000 | 135000 |
| Total Industry Size | 1520000 | 1702000 | 1910000 | 2155000 | 2420000 |
Numbers demonstrate multivariate growth, indicating compounding demand in the consumer and industrial sectors. Additionally, it accentuates the need for increased domestic manufacturing. Startups see an opportunity in these gaps that can be strategically filled with contract services, and innovation-driven solutions.
Manufacturing Process Outline: Key Insights for Startups
Starting a chemical manufacturing business is more than just setting up reactors for compound mixing. It involves thorough knowledge of process technology and equipment, material handling safety, and environmental concerns.
General Steps in the Manufacturing Process:
Sourcing the Required Raw Materials
For specific products like surfactants, pigments, resins, or agrochemicals, key inputs include:
- Petrochemical Derivatives: Ethylene, benzene, propylene
- Inorganic Minerals: Sulfur, limestone, chlorine
- Solvents, acids, and catalysts
Chemical Reaction Phase
This is a transformation step conducted in batch or continuous reactors. It can include:
- Heating and cooling under controlled pressurization
- Use of catalysts for improved reaction efficiency
- Real-time monitoring to mitigate contamination or explosion risks
Purification Steps
Post reaction, the chemical mixture undergoes treatment, through:
- Distillation
- Crystallization
- Filtration or centrifugation
These techniques enhance product quality by removing impurities and recovering solvents.
Formulation and Blending
The product is then:
- Blended into its commercial form (paste, liquid, powder)
- Adjusted for pH, viscosity, texture, and color
- Packaged according to market application and customer specifications
Quality Control and Certification
Each batch undergoes lab testing for:
- Purity, consistency, and contamination
- Compliance with ISO, REACH, and BIS norms
- Export certification if required
Effluent Treatment and Environmental Safety
Compliance with Zero Liquid Discharge (ZLD) mandates and local pollution control norms is critical:
- Install ETP and STP units
- Maintain chemical handling logs
- Schedule regular audits
Related: How Chemical Manufacturing is Adapting to Sustainable Chemical Manufacturing Practices
High-Growth Opportunities: Where the Real Gaps Lie
Instead of competing in heavily saturated markets such as commodity chemicals, new ventures have a better chance of meeting gaps in niche, small, and high-margin areas.
Designated Areas with Further Potential Focus for New Startups:
Specialty Chemicals
These include performance additives, textile auxiliaries, electronic chemicals, and cosmetic ingredients. They are often small in volume but can be sold for a high price.
Green and Bio-Based Chemicals
Due to rising ESG concerns, the following are in demand:
- Biodegradable Ethanol Surfactants
- Solvents Derived from Ethanol
- Colorants and Antioxidants Derived from Plants
Contract Manufacturing Services
As large corporations outsource production, Indian small to medium-sized companies can provide:
- Custom Synthesis Services
- Intermediate Toll Manufacturing
- Private Labeling Co-Branding Services
Import Substitution
India remains a major importer of dyes, APIs, and plasticizers. Startups can gain favorable policies and market positioning by reverse engineering these compounds and localizing them.
Navigating Challenges: What Founders Must Prepare For
While opportunities are plenty, there is a high degree of complexity and risk that founders must be ready for in the sector.
Key Challenges in the Sector:
Regulatory Delays and Compliance
Obtaining environmental clearance from the Ministry of Environment and Forests (MoEF) along with the pollution control boards can take as long as a year. Further, navigating state-specific regulations makes it worse.
Infrastructure Gaps
Some industrial regions still lack:
- Round-the-clock electricity and water supply
- Safe systems for chemical waste
- Facilities for storing hazardous chemicals
Shortage of Skilled Employees
Small towns often lack:
- Lab technicians
- Process engineers
- Fire safety professionals
Supply Chain Gaps
Margins can be strained by fluctuating prices of raw materials globally. Therefore, efficient sourcing and long-term vendor contracts are vital.
How NPCS Assists Entrepreneurs in the Chemical Manufacturing Sector
Every entrepreneur, whether an experienced industrialist or a newbie, requires a business strategy that is compliant with regulations and technical standards. NPCS provides detailed guidance at this stage.
How NPCS Helps:
By Preparing Comprehensive Techno-Economic Feasibility Reports
These cover emerging opportunities along with existing ones by tracking the market progress and evaluating rival businesses as well as their chemical industry product licensing prerequisites.
Completing All Manufacturing Aspects
Their reports provide with:
- Manufacturing process diagrams
- Inventory Collections
- Utilities and plant layout drafts
Determining Startup Feasibility
NPCS allows founders to:
- Validate the market premise of the idea
- Draft proposals for funding and permits
- Make decisions about land and scale of operations
Their experience enhances venture opportunities while safeguarding technical clarity, thus helping the founders better navigate complexities.
For more information check our Project Reports
Conclusion: India’s Chemical Future Needs Smart, Early Movers
India’s emergence as a $2 trillion chemical economy is not a question of if, but when. The pieces are already in place—policy momentum, global demand shifts, evolving domestic infrastructure, and skilled human capital. What remains is the execution capacity of India’s entrepreneurs.
Startups with the vision to innovate, the patience to comply, and the agility to adapt will lead this transformation. Whether it’s through contract manufacturing, green chemistry, or import substitution, the future of India’s chemical industry will be shaped by those who start today.
And as this future unfolds, partners like Niir Project Consultancy Services stand ready to ensure that these ventures are not just ambitious—but also viable, scalable, and globally competitive.
