India’s Chemical Sector: Navigating U.S. Tariffs and Redrawing the Trade Map

As global supply chains undergo significant realignment, India's chemical sector faces both challenges and opportunities. This article explores how India can strengthen its domestic manufacturing base and compete globally.

Chemical IndustryRegulatory ComplianceSupply ChainRdMsme SupportReal EstateMay 16, 2025

India’s Chemical Sector: Navigating U.S. Tariffs and Redrawing the Trade Map

Real Estate:While new market opportunities are welcome news, the next step is to strengthen our domestic chemical manufacturing base, which can make us more capable and better positioned to capitalize on our advantages.nnFirst, one of the biggest hurdles for India’s chemical exporters today is navigating a complex web of regulations and standards. For instance, complying with international standards like the U.S.’s Toxic Substances Control Act and the EU’s Registration, Evaluation, Authorisation and Restriction of Chemicals can be both costly and time-consuming due to a lack of necessary infrastructure and a skilled workforce trained to navigate through complex regulatory requirements. To ease this burden, India can look to build strong compliance management systems that can simplify processes like documentation, approvals, and certification. Besides, exporters can also work closely with industry bodies to voice their concerns and engage with policymakers, pushing for a more streamlined and easy regulatory landscape.nnSecond, India’s high dependence on the import of chemicals and input goods leads to longer lead times and pricing challenges, making chemical exports less competitive. Besides, India has been active in imposing anti-dumping duties to protect the domestic industry from cheap imports. While these duties serve an important purpose, they can also push up input costs for domestic manufacturers and lead to supply chain disruptions. As goods become more expensive, they lose their edge in competitive markets, making it harder for Indian exporters to retain demand and also capture market share. To address this, India can identify critical input materials, such as intermediates and specialty chemicals, that are essential for domestic chemical manufacturers and focus on building their domestic supply chains. Investing in the right infrastructure and building robust value chains can help in reducing import dependence. Along with this, while imposing anti-dumping duties, the government can consider striking a balance between protecting local producers and ensuring that the industry does not face high input costs or supply shortages.nnLastly, India faces stiff competition from leading global chemical manufacturers like the U.S. and China, who lead in both production and exports. To compete on that scale, India needs to boost its global competitiveness by investing more in technology and R&D. We can take lessons from global best practices to match the innovation and scale of these top global players. For instance, China has developed an extensive network of over 600 chemical parks. In comparison, India has four Petroleum, Chemicals, and Petrochemical Investment Regions. Going ahead, the government can accelerate the development of such specialized industrial zones, which can also help in boosting R&D and accelerating tech integration across the sector. Additionally, the private sector can also increase innovation investments. Currently, some of the larger specialty chemical companies in India spend less than 3 per cent of their revenue towards R&D activities, which can be increased to enhance technological upgradations.nnBesides, to strengthen the domestic value chains—especially for critical input materials—the government can enhance support to the MSME sector by making credit more affordable, lowering interest rates, and easing collateral norms. Given the capital-intensive nature of the chemical industry, these measures can make our domestic manufacturing ecosystem more competitive and resilient.nnThere is adversity. But there is also opportunity. India can play on its strengths while also addressing underlying manufacturing challenges to capture a larger market, helping the chemical sector turn current disruptions into long-term gains.

Frequently Asked Questions

What are the main challenges faced by India’s chemical exporters?

India’s chemical exporters face challenges such as navigating complex international regulations, high import dependence, and stiff competition from global leaders like the U.S. and China.

How can India simplify the regulatory landscape for chemical exports?

India can build strong compliance management systems and work closely with industry bodies to streamline processes like documentation, approvals, and certification.

What measures can be taken to reduce import dependence in the chemical sector?

India can identify critical input materials and focus on building domestic supply chains by investing in infrastructure and robust value chains.

How can the government support the MSME sector in the chemical industry?

The government can enhance support to the MSME sector by making credit more affordable, lowering interest rates, and easing collateral norms to make the domestic manufacturing ecosystem more competitive and resilient.

Why is R&D important for India’s chemical sector?

R&D is crucial for boosting global competitiveness, innovation, and technological upgradations. India can learn from global best practices and increase R&D investments to match the scale of leading global players.

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