Despite the challenges of infrastructure and the pace of development in competitors, India still has a good base for growth. Its population has a cultural desire to be educated, it has an enormous home market for end use chemical products and it has a strong banking sector and access to research funds from both domestic and foreign markets.
The investment in research has been observed by Samit Jain, Director at Pluss Polymers, first hand. He says, “Spending in innovation and R&D has increased dramatically. Venture capital firms are looking beyond the conventional domains of e-commerce, internet and service based companies to fund product developments. Perhaps this explains why Tata Capital Innovation Funds has funded Pluss Polymers with $1.33 million to develop specialty chemicals and polymeric additives.”
He continues by noting how the growth in domestic markets for specialty chemicals is being spurred by growth in the consumables market, and how the growth of the Indian middle class is supporting Indian chemicals expansion. He says, “[The growth] is primarily because of the increased sales in the consumer electronics and automotive segments. In the last few years, a lot of focus has been seen in the R&D sector. Several research institutes, national laboratories like NCL [the National Chemical Laboratory in Pune] and private sector companies are focusing on developing specialty chemicals and polymeric additives for the automotive, textiles, packaging and other end user segments.”
This is a view supported by Manish Panchal, Practice Head – Chemical and Energy at Tata, who notes that, “Higher disposable incomes are fuelling the growth of end-user industries. As a result, the chemicals industry is expected to grow at 13 – 17% over the next five years.”
Kumar Kandaswamy, senior director, Deloitte Touche Tohmatsu India, also believes that the growth targets can be achieved. His research projects specialty chemicals industry growth of 14% over the next five years, and believes much of this growth has been aided by macro-economic trends.
Sunil Jain, Head of Equity Research at Nirmal Bang Securities concurs, stating that, “In the last few months, depreciation of the Rupee, appreciation of the Yuan and an increase in the cost of production in China have helped Indian specialty chemical companies to garner more market share, both in domestic and international markets. I feel specialty chemicals firms are likely to continue outperforming in the next one year.”
Overall, there are a multitude of possibilities for trade and growth in Indian specialty chemicals. Whilst it may already be behind China and other developing Asian producers in terms of production capabilities, and its infrastructure needs an overhaul, it has a market that needs product. India has a youthful, aspiring 1.2 billion people who are hungry for the products of the modern world. All of these products require chemicals, and as the products of the future are increasingly specialised, the chemicals that they require will also specialised.
Its business friendly government and the funds that it has (both foreign and domestic) to support chemicals research and product development, will ensure that India will be a strong player in global chemical supply. For the chemicals trader looking to India, the opportunities are there.