Chemicals

The chemicals sector is amongst the most important manufacturing industries across the globe, contributing to improvement in productivity, efficiency and quality across several end-use industries. Over the last two decades, the global chemical industry has been concentrated largely in China, EU and U.S. With the outbreak of the COVID-19 pandemic, there was a sharp decline in global production driven by demand slowdown due to lockdowns as well as supply chain disruptions in both feedstock and end-product movement.

India showcased continuous growth and outperformed the global industry in the past decade driven by strong domestic demand, export competitiveness and an enabling ecosystem owing to:

• Manufacturing growth driven by usage in construction, automotive, food and beverage (F&B) and consumer products
  
• Robust growth expected in packaging across consumer and industrial sectors driven by increase in domestic demand
  
• Government setting up PCPIRs (Petroleum, Chemicals and Petrochemicals Investment region) to promote investment
• Rising competitiveness of domestic production, investments in R&D and protection from cheap imports
• Increased exports to EU and the U.S. upon recognition as a reliable source for chemicals
  
• Significant investments in production of high-growth downstream specialty chemicals with substantial export potential.

As a result, global companies have turned towards India to ensure continuous supply of high-quality chemicals at competitive prices, not just to meet domestic demand in India but also to serve export markets. India’s chemical industry is expected to grow at CAGR of 7 to 8 per cent to reach ~USD160 bn by 2025 and account for 3-3.5 per cent of the global chemical industry according to KPMG in India’s analysis.

De-licensed and de-regulated industry

• 100 per cent FDI is allowed in the Indian chemical industry through the automatic route
• De-licensed manufacturing of most chemical products (organic and inorganic), dyestuffs and pesticides.

Growing chemicals infrastructure

• Dedicated regions in four states of India: Tamil Nadu, Gujarat, Andhra Pradesh and Odisha spread over 250 sq. km. with manufacturing facilities, logistics support, and other services²
• Plastic parks to synergise capacities and improve efficiencies.

Financial support and subsidies

• R&D incentives and weighted tax deduction for private and sponsored research expenditure at national labs and institutes
• Various export, state, and area-based incentives (SEZ/NIMZ).

Increasing availability of raw material

• Investments to increase local production to reduce import dependence

Location advantage and FTAs

• India is centrally located in the trans-Indian Ocean routes connecting Europe with east-Asian countries
• Proximity to Middle East provides access to petrochemical feedstock at a low cost
• India has 13 executed FTAs and 16 under negotiation, which is more than any other SEA country.³ 

A leading professional services firm

• Currently servicing more than 140 clients in the chemicals industry
• A strong advisory practice that is well positioned to support clients across a gamut of strategic initiatives like product-market strategy development, major project advisory, M&A and deals advisory, supply chain optimisation and cost optimisation among others
• Robust credentials across areas like ESG and decarbonisation, which are increasingly gaining strategic importance among chemical manufacturers
• Digital transformation is also an integral part of our offerings, helping transform business models, operations, customer experiences and empowering workforces in the chemicals sector
• We are part of a global network: KPMG International’s member firms serve 92 of the 110 chemicals companies listed on the Chemical Week, Billion Dollar Club list.

IN-FM Global Supply Chain Realignment