The disruptions caused by the COVID-19 pandemic in the past two years wreaked havoc on the Indian economy and exposed the country’s dependence on China for an array of products ranging from raw materials for the manufacturing sector to finished goods.
Also, the growing differences with the neighbouring country and the anti-China sentiment across the globe reached a peak during this time after the pandemic choked global trade. It acted as a catalyst for the Indian government to push for ‘Make in India’ and ‘Aatmanirbhar Bharat’—the two most important measures undertaken by the Narendra Modi-led government.
In the past two years, the Union government has adopted several measures to ensure the country remains on track towards self-reliance and ‘Make in India’.
Domestic chemical players can secure significant share in global market
Interestingly, the global market for the specialty chemicals segment is expected to touch $64 billion by 2025 and the domestic chemical players can secure a significant share of this market, provided India plays its cards right.
In its bid to make India a $5 trillion economy, the Centre has deployed various stimulus programmes and packages across sectors like manufacturing, IT, etc. The chemicals sector, too, needs liberal laws and tax relaxation mechanisms to fast track its growth. Before the pandemic began, the Indian chemical industry was expected to attract investments worth Rs 8 lakh core by 2025. With sustained ‘Make in India’ effort and focus on building capabilities in the chemical manufacturing processes, the country is likely to achieve the projected figure.
PLI schemes for sector to open opportunities for capex
Realistically to achieve this target, we expect the government to incentivise the specialty chemicals sector with strategic PLI schemes to inject the sector with anticipation and growth. Also, the PLI will usher in a new wave which will open opportunities for a huge capex in the industry, resulting in steady growth. Overall, this would be a huge building block for the rest of the industries as the specialty chemical segment provides basic and crucial raw materials for all the down-the-line industries. This coupled with the continuation of a low-interest cycle will ensure various enterprises invest and opt for huge capex.
With a robust self-reliant PLI scheme and low interest, India will be on track to become self-sufficient and competitive at the global level in the specialty chemicals value chain.
Tech advancement to boost manufacturing process
Another aspect that 2022 will usher in is the advent of technology like AI, automation, 5G, and its impact on the manufacturing process. It will also be a significant year for the IT and technology sector, with key announcements likely in the 5G, connectivity, startup and telecom space.
The need of the hour for the chemicals sector is to weigh in these technological advancements and adopt them early. Profitability, sustainability and ESG are some of the metrics in which technology helps in connecting the dots. It is imperative for an industry such as chemicals to not just streamline its manufacturing processes, but also deploy these cutting-edge technologies in research and development.
For instance, now-a-day ESG compliance officers, activists, and top chemical enterprises are looking at ways to invest in alternative ways of manufacturing specialty chemicals, reducing carbon footprint, reducing operational costs, and ensuring optimum energy utilisation. Similarly, automation and data analytics will reduce wastage while ensuring optimum use of resources.
Widen base of Make in India 2.0 mission
From a macro perspective, the pandemic has been highly disruptive, and each wave brought its own set of challenges. The frequent lockdowns, global and local travel restrictions, and other disruptions have fundamentally changed consumer behaviour across categories, with a far-reaching impact on manufacturing and the supply chain. The economic recovery after the COVID shock is still delicate and will dictate fiscal support.
The Make in India 2.0 mission focuses on 27 sectors, and the government needs to widen the base to include more sectors. It needs to focus on facilitating investment and establishing schemes for domestic investments. We look forward to announcements that will lay emphasis on the progress of the overall manufacturing sector.
A digital transformation of the production units or factory floors is a new reality, with the pandemic paving the way to have less reliance on the fragile workforce and physical space.
We are optimistic about the upcoming Budget and look forward to the government’s support measures to revive consumption for economic growth.
The writer is Chairman and MD, Meghmani Finechem.