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India’s specialty chemicals sector gears up for global transition
Articles- Sep 27,25
India’s specialty chemicals industry is transitioning from a fragmented, domestic-focused market to a global hub, supported by policy reforms, R&D investment, and rising export opportunities. Dr Amitt Nenwani, MD, Shivtek Spechemi Industries Ltd, emphasises how GST 2.0, PLI schemes, and China+1 dynamics are accelerating this pivotal shift.
Almost everyone is familiar with products made using chemicals, whether it’s paints, plastics, fertilisers, etc. Available in various forms, chemicals can be derived from varied sources such as minerals, animals and plants. Broadly, the chemicals segment can be classified into two sections: bulk and specialty chemicals. Bulk chemicals refer to mass-produced, standard industrial chemicals such as sulphuric acid or caustic soda. As the name denotes, bulk chemicals are produced in large volumes.
Decoding the niche domain
Conversely, specialty chemicals fall in a different zone altogether. Here, the emphasis is on function rather than volume, as these chemicals are utilised for specific purposes. Each specialty chemical can be used for a certain function or application. For example, generating foam in a shampoo. Or helping plants with better pesticide absorption to boost the total yield.
Unlike bulk chemicals, here performance counts. As a result, safety, performance and environmental standards are extremely high in specialty chemicals, be it for the domestic market or exports. As they are custom-produced and generally used in low volumes, specialty chemicals command premium prices. Key kinds of specialty chemicals include surfactants, dyes and pigments, polymers, flavours and fragrances, textile chemicals, water treatment chemicals, construction additives, as well as personal care and cosmetic ingredients, among others.
In the country’s $200 billion chemical industry, specialty chemicals account for around $36 billion or 18 per cent market share. However, this segment has been outperforming other industrial spheres since it is growing swiftly at a CAGR of 12 to 16 per cent. While this unique enterprise realm is extremely niche, it remains equally fragmented. Consequently, the segment is dominated by numerous small to medium companies, each of which is focused on a niche category. Therefore, one firm may specialise only in paint and plastic pigments. Another may only make shampoo and soap surfactants.
Considering this situation, most companies are not fully integrated and don’t deal with every element in the value chain, ranging from the raw material to finished products. So, one company could purchase basic chemicals, converting them into intermediate ones, while another may take these intermediates to produce the end product. This ecosystem makes every specialty chemical company unique since each has its distinct dynamics, with individual customers and specific kinds of R&D.
The transition from bulk to specialty chemicals
For years, India was a country of bulk chemicals, with these businesses managed on huge volumes but at low cost. During the past decade, some domestic companies began to focus on specialty chemicals, recognising its higher potential. This is when the situation slowly began to change. Gradually, India emerged as a significant player in the world’s specialty chemical export market.
When it comes to specific products such as dyes, surfactants or pigments, the country already ranks among the top exporters worldwide. Interestingly, this shift came about after China vacated this market. The action began when China cracked the whip on polluting chemical factories, many of which were then shut down. Global buyers soon began searching for other suppliers. This is when India filled the breach to some extent. There is no doubt that the China+1 global supply chain strategy presents the country with a huge opportunity to step up as a dependable alternative manufacturing hub for specialty chemicals.
Nonetheless, China still predominates with a market share of 32 per cent, given its exports of commodity and specialty chemicals. In contrast, India holds only 4.3 per cent of the market while being the world’s fifth-largest player. But the country is making steady strides in the global specialty chemicals market that is presently pegged at $4.7 trillion. This makes specialty chemicals one of the biggest industrial segments worldwide. Yet most of the market is propelled by low-margin, high-volume commodity chemical products. Against this backdrop, the real action is in specialty chemicals, which presently contribute to barely 20 per cent of global chemical volumes yet have a substantially higher value-add.
The bane of trade tariffs
Today, trade tariffs are adding another level of complexity to an already complex sphere. Given their specialized applications in manufacturing and the high value, specialty chemicals are under severe tariff pressure. Since tariffs have disrupted supply chains and distorted trade flows, this has triggered major price volatility impacting olefins, polymers and specialty chemicals in particular.
This impact extends much beyond a direct cost rise. Instead, there are supply chain challenges alongside sourcing concerns, compounding the complexity of procurement processes. In such a scenario, some key specialty chemicals impacted by tariffs include pharmaceutical intermediates, advanced polymers, performance additives and electronic chemicals.
GST 2.0 reforms a timely boon
Fortunately, the Central Government had taken cognisance of the detrimental impact of tariffs on multiple sectors, including specialty chemicals. With GST categorised in the dual slabs of 5 per cent and 18 per cent, taxation has been simplified for the chemical industry. GST restructuring will also reduce the input levies on acids, fertilisers and intermediates while correcting duty distortions and boosting cost efficiencies.
Further, the industry anticipates that these reforms will enhance supply-chain stability, raise domestic competitiveness and bolster the country’s global chemical presence. Overall, broad structural reforms will ease the compliance burden, introduce clarity in classification and streamline refund processing. This will be extremely beneficial for chemical manufacturers dealing with a maze of export-import rules and other stringent regulations. The strategic timing of GST 2.0 reforms is laudable as it will help in easing global trade pressures, tariff stress and issues related to market volatility.
Current challenges and countermeasures
However, the specialty chemicals sector faces several structural challenges. These include infrastructure shortfalls, heavy dependence on imported feedstock, low R&D efforts and regulatory hurdles. Proactive mitigation measures, dedicated focus on technological advancements, sustained R&D investments and initiatives, as well as digitalisation and compliance with strict ESG (environmental, social and governance) norms will be crucial for the industry’s accelerated growth and global dominance.
Why specialty chemicals enjoy a bright outlook
Despite some gaps in the segment at present, several favourable factors augur well for India’s rise in the global specialty chemicals universe. To begin with, most countries are keen to de-risk their operations from excessive dependence on China. In context, India offers an excellent alternative due to its stable political leadership, technically skilled workforce and comparatively cost-effective manufacturing.
Additionally, the country is upscaling its R&D capabilities, particularly in green chemistry, formulation and process optimisation, which are pivotal pillars to drive competitiveness in specialty chemicals. Besides exports, the domestic demand potential is equally bright because the country’s per capita chemical consumption is barely 10 per cent of the world average. This highlights the tremendous potential for domestic growth in various industries, including pharma, personal care, textiles, construction, automotive, etc.
Many user industries also benefit from institutional programmes like the PLI (production-linked incentive) scheme and the promotion of special sector-specific manufacturing zones. India is also negotiating FTAs (free trade agreements) with the UK, EU, ASEAN and other regions that will permit duty exemptions on critical raw materials. Simultaneously, anti-dumping duties on cheap Chinese imports are safeguarding domestic producers. As the specialty chemicals segment expands rapidly via innovation, policy support and rising demand from diverse domains, India is poised to emerge as a global specialty chemicals hub.
According to NITI Aayog, India is projected to attain a chemical output of $1 trillion by 2040, along with a 12 per cent share of the global value chain. Recent institutional reforms that offer subsidies and provide speedy clearances, R&D incentives, the creation of special manufacturing zones and other advantages are all bound to lower import dependence while driving greater innovation in green and specialty chemicals. Thanks to the range of measures, the Centre’s ambitious vision of making the country a global specialty chemicals powerhouse will be realised sooner rather than later.
About the author
Dr Amitt Nenwani, a dynamic and seasoned leader in the chemical industry, currently serves as the Managing Director of Shivtek Spechemi Industries Ltd. He oversees all aspects of business operations, while expanding Shivtek’s global presence in specialty chemicals, leading green chemistry innovations for a sustainable future and driving smart manufacturing and digital transformation in chemical production.
2 Blurbs
GST restructuring will reduce the input levies on acids, fertilisers and intermediates while correcting duty distortions and boosting cost efficiencies.
As the specialty chemicals segment expands rapidly via innovation, policy support and rising demand from diverse domains, India is poised to emerge as a global specialty chemicals hub.
Dr Amitt Nenwani
Shivtek Spechemi Industries
Specialty chemicals industry
India chemical exports
GST 2.0 reforms
China+1 strategy
Green chemistry
PLI scheme
NITI Aayog
Global supply chains
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