India’s Chemical Industry Poised for Global Growth, Says McKinsey

India has the potential to emerge as a global supply hub for chemicals, driven by its strong cost competitiveness and market attractiveness over the past five years, according to a report by McKinsey & Company in collaboration with the Indian Chemical Council.

The report highlights India's significant contributions across 16 speciality chemical sub-segments, including flavours, fragrances, food, and nutrition-based chemicals, reinforcing its growing role in the global chemical supply chain. Despite industry-wide margin pressures and macroeconomic challenges, revenue growth remains strong, underscoring the sector's resilience.

India’s Competitive Edge in Chemical Manufacturing

The report attributes India's growth in the chemical sector to strong macroeconomic fundamentals, abundant skilled talent, and a low-cost manufacturing advantage, positioning the industry for long-term expansion. It further states that despite rising competition, fluctuating industry demand, and geopolitical uncertainties, Indian chemical companies have substantial value creation potential.

With a CAGR of approximately 10.5% between FY18 and FY24, the chemical industry has outpaced India’s GDP growth of around 9% in the same period, signaling its increasing significance in the country’s economic landscape.

High-Growth Segments Driving Expansion

Several speciality chemical segments have seen robust expansion, particularly in food and nutrition, where growing consumer demand for premium and organic ingredients has led to significant revenue and EBITDA growth.

Other high-performing segments include:

Paints & Coatings – Driven by industrial coatings, which account for about 30% of the segment’s total revenue, supported by demand from consumer durables, automobiles, and allied industries.

Flavours & Fragrances – Benefiting from increased demand for personal care and food products.

Amines, Adhesives & Sealants – Witnessing rapid growth due to product diversification and geographical expansion, though margin growth remains limited.

Conversely, segments such as agrochemicals, plastic additives, surfactants, inorganics, dyes and pigments, and lubricants and fuel additives have faced challenges in revenue and EBITDA performance, largely due to weaker demand and volatile input costs. The amines industry, in particular, has been impacted by fluctuating raw material prices (alcohols, ammonia, and acetic acid), affecting overall profitability.

Rising Domestic Consumption Fueling Demand

India’s household consumption has nearly doubled over the past decade to USD 2.14 trillion in FY24, making it one of the world's fastest-growing consumer markets. The country is projected to become the third-largest consumer market globally by 2026, with key end-segments such as cosmetics, automobiles, packaged food, and consumer durables exhibiting significant demand.

The consumer durables industry alone is expected to grow to USD 60 billion by 2030, positioning India as the fourth-largest industry player by 2027.

India’s Role in the Global Chemical Supply Chain

As India strengthens its foothold in the global chemical industry, the report underscores its ability to meet worldwide demand through cost-efficient manufacturing and sectoral resilience. With sustained growth across various sub-segments and favorable economic conditions, the country is well on track to becoming a key player in the international chemical supply chain.