Rarely a day passes without the Prime Minister or a cabinet minister speaking about the importance of Atmanirbhar Bharat. The Start-up India scheme is a pillar in promoting this vision, and considerable enthusiasm has been reported in promoting start-up projects across the country. While these developments are positive, Atmanirbhar Bharat does not seem to have made significant progress within the Indian chemical industry. This is a matter of high concern that needs urgent and dispassionate analysis.
India has achieved significant economic growth over the last eleven years and has emerged as the fourth-largest economy in the world. However, this growth has been largely enabled by the services sector and, to some extent, the agricultural sector. The chemical industry could have played a much bigger role in boosting industrial and economic growth if the obvious opportunities had been adequately exploited.
Alarming Import Dependence
It is said that the pharmaceutical industry has significantly contributed to the country's industrial and economic growth, particularly by penetrating the international market. It is claimed that around 45% of the generic pharmaceuticals used in the USA are produced and exported from India. However, most of these are generic drugs and formulations. The Active Pharma Ingredients (APIs) required are substantially imported, particularly from China. It has been warned that if China were to impose a ban on API exports, Indian pharmaceutical units would be destabilized. This situation must be avoided.
The overall economic growth is spurring consumption, and consequently, the demand for various chemicals is steadily increasing. The ground reality is that, alongside economic growth, chemical imports are climbing at almost the same rate due to inadequate domestic capacity build-up. A careful analysis would highlight that such huge import dependence for several bulk chemicals, specialty chemicals, and APIs is avoidable.
Many examples illustrate the increasing import levels. Chemicals such as methanol (over 3 million tonnes per annum), polyvinyl chloride (PVC) (over 3 million tonnes per annum), and styrene (over 1 million tonne per annum) are imported in large quantities. The list also includes acetic acid, polyvinyl alcohol, methylene diisocyanate (MDI), and acrylonitrile, along with many small-volume specialty chemicals that are not capital-intensive. While import levels rise steadily, no proposals or plans have been announced to build capacities for many of these chemicals.
Numerous chemical project opportunities remain unexploited in India, despite no insurmountable constraints. Even where issues exist, there are ways to overcome them to forge ahead.
A Few Case Studies
· Ethylene and Propylene Projects: India faces a short supply of ethylene and propylene, crucial building blocks for the chemical industry. This shortage prevents the setup of downstream projects; for example, PVC production is not increased due to ethylene scarcity. Since these hazardous chemicals cannot be easily imported, India must find ways to produce them adequately. Ethylene and propylene can be produced from methanol, a method used extensively in China. However, India is also import-dependent for methanol. While importing methanol for olefin production is an option, a healthier long-term strategy would be for Indian promoters to set up methanol projects in natural gas-rich countries like Russia or Trinidad and Tobago, mirroring the approach taken with phosphoric acid units in the Middle East.
· Acetic Acid from Methanol: India is a large importer of acetic acid due to a lack of domestic capacity, partly attributed to the short supply of methanol. Ensuring the availability of competitively priced methanol could facilitate capacity build-up for acetic acid. Is there sufficient strategic thinking on these lines?
· L-Lysine from Starch: L-Lysine, an important amino acid for poultry feed and pharma, is imported to the tune of over one lakh tonnes per annum. It is produced from starch, and it is unacceptable that India does not produce it domestically, especially given the thrust on poultry industry growth.
· Titanium Dioxide from Ilmenite: Despite possessing over 12% of the world's ilmenite reserves, India imports over four lakh tonnes of titanium dioxide pigment annually. Chlorine, the other key input, is adequately available. There is no justification for not setting up more titanium dioxide projects.
· Chlorine-Based Products: Several chlorine-based products like chlorosulphonated polyethylene, chlorosilane, vinylidene chloride, and chlorinated polyethylene are not produced in India and are entirely imported. These are low-volume, high-relevance products. With several caustic soda units struggling to find outlets for chlorine, why are these products not being produced?
Emerging Opportunities
Beyond current demand, several chemicals will be needed for emerging sectors, yet no strategic plans seem to be in place.
· The semiconductor industry is a thrust area, with the government approving significant investments. This industry requires high-purity electronic chemicals like high-purity sulphuric acid and ammonium hydroxide, none of which are produced in India today.
· Several lithium-ion battery cell projects are being set up. These require inputs and specialty chemicals not produced in India, such as cathode actives, lithium titanate, lithium hexafluorophosphate (electrolyte), polyvinylidene difluoride (binder), and separators.
It is surprising that forward planning is not being carried out to produce these chemicals. Without such projects, India will inevitably become a large importer just as these new industries take off.
Where Are the Hurdles?
Conferences on the chemical industry often feature speeches by ministers and bureaucrats that eulogize growth and highlight isolated bright spots, like India being a top-five refiner, without a holistic, in-depth analysis. The ground reality is that from April to October 2025, India imported petroleum, crude, and products worth $112.9 billion, while exporting only $41.1 billion worth of petroleum products and $17.1 billion of drugs and pharma. One often leaves such conferences feeling that core issues remain unaddressed.
· Is There a Lack of Funds for Investment? No. Corporate undertakings, including in chemicals, are performing reasonably well. The Chairman of the State Bank of India noted in August 2025 that Indian corporates have strong balance sheets, hold significant cash reserves (around ₹13.5 trillion), and are primarily funding capex internally or via capital markets. Public issues are oversubscribed, and financing institutions are willing to lend for worthwhile projects. A lack of funds is not the constraint.
· Is There a Technology Constraint? Yes. Many companies cite the lack of commercially proven domestic technology as a barrier. While large projects acquire technology from abroad, small and medium-scale projects find it difficult due to exorbitant fees. Government-funded research in CSIR labs and universities has yielded few globally competitive and commercially exploitable technologies. R&D efforts in the private and public sectors are often minimal and lack the required impact.
· Is There Bureaucratic Red-Tapism? Yes, to some extent. While ministers set policy, implementation rests with bureaucrats who often lack domain knowledge due to frequent transfers. This makes vital decisions difficult, leading to repeated postponements. India has numerous experienced chemical engineers and technologists, but there is no effective consultative mechanism to utilize their knowledge. Suggestions submitted to ministries often seem to go unstudied.
· One organization developed technology for pharmaceutical-grade propylene glycol but, after several months, has not received an inspection from the ministry.
· A request for approval to produce dimethyl ether (DME), an eco-friendly LPG substitute, has been met with vague directives and no decision.
· Suggestions on algae biofuel and beet sugar cultivation for ethanol have not been adequately studied.
What Is the Solution Now?
The domestic technology constraint is unlikely to be overcome soon. Therefore, importing technology is a necessary option. India can learn from China's policy. A few decades ago, the chemical industries of India and China were nearly on par. China facilitated rapid growth by encouraging massive investment from multinational companies in both manufacturing and research, lured by its large market and consistent government support. This has become a win-win situation, allowing China to develop its own technological strength and now compete with advanced nations.
Indian companies should proactively acquire technology from Chinese companies to set up manufacturing units in India. This would, over time, reduce chemical imports from China. Given the current scenario, Chinese engineering and technology suppliers are often receptive to such requests, except where their government imposes bans. Many Indian chemical companies dealing with China have expressed that acquiring technology from Chinese companies, particularly without equity participation, is possible and may be more advantageous compared to dealing with multinationals from other countries.
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*Trustee, Nandini Voice For The Deprived, Chennai
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