For more than two decades, India has nursed ambitions of challenging China’s manufacturing supremacy, yet these dreams remain unfulfilled. China’s pervasive dominance in numerous sectors has dissuaded importers from seeking alternative suppliers. However, in the chemicals sector, India had a significant opportunity that could have reshaped the fortunes of its companies—an opportunity it lost.
Between 2015 and 2017, China’s chemical manufacturing capacity experienced a notable decline, with 40% of the facilities closing due to stringent environmental regulations. The onset of the US-China trade war exacerbated this situation, providing a favourable window for Indian companies. The surge in valuation of Indian chemical firms during this period mirrored the optimism of the moment. The collective market cap of 198 listed companies soared by 54.4% from ₹2,85,157 crore in 2014–15 to ₹4,40,482 crore in 2016–17, according to data from Ace Equity.
India ranked fourth in Asia and sixth in the world, with chemicals sales (excluding pharmaceuticals) valued at 101 billion euros in 2017, according to European Chemical Industry Council Report, 2018. Despite this, it failed to capitalise on the market share relinquished by China.
Prathamesh Sawant, analyst at Axis Securities, says there was a phase when Chinese chemical companies were witnessing a slowdown because of the Covid-19 pandemic and hiccups in the domestic economy. “During China’s slowdown, India saw traction in chemical exports due to global supply situation favouring Indian players, which led to optimism surrounding India’s chemical industry as an alternative to China. However, that transition has been slower than expected. The sector has faced headwinds in the past seven to eight quarters,” he says.
Pandemic and After
This story is from the May 2024 edition of Outlook Business.
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This story is from the May 2024 edition of Outlook Business.
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