An environmental agenda for the growth of India’s Chemical Sector
19 September 2016
by Rupam Raja & Jaydeep Sathaye
Can India become the next big chemical manufacturing hub of the world? Government, through the Make in India campaign, plans to increase overall manufacturing share of GDP from the current 16% to 25% over the next five years. Chemical Sector is the bedrock of a manufacturing economy.
As manufacturing increases, so will the demand for chemicals. The fundamentals of a robust chemical demand in India are in place with the rapidly growingmiddle class and low penetration of chemical use. Over the last two decades of India’s rapid GDP growth, Industry has largely imported chemicals to meet its requirement. This time round the business and policy fundamentals for domestic manufacturing appear stronger.
China evokes a lot of interest in India for the spectacular growth of its Chemical Sector. Over the last twenty years, China has become the largest producer of chemicals in the world, riding the growth of its manufacturing sector. In
doing so, China has created jobs for its people and taken hundreds of millions of people out of poverty.
Today, Chinese public and private sector multi-national companies dominate the global business landscape. Chinese policymakers saw a strategic significance in the Chemical Sector to the extent that sensible commercial and regulatory checks and balances were set aside to enable its growth. The Industry grew but it also resulted in large scale degradation of air, ground and water in China. The massive explosion at Tianjin Port’s chemical warehouse in 2015 that was visible from space was a loud testimony to the safety and health issues that plague China’s chemical sector. It is an open question if China’s economic growth justifies the environmental cost that the country has incurred.
Replicating China’s growth model is a tantalizing prospect for India’s Government and the Industry. However, growth at the expense of the environment will not fit in India’s socio-politicalcontext given India’s large, poor and vulnerable population and its democratic political structure. India should instead look at the twenty year history of growth of chemical industry in China, learn from its mistakes, and create the Industry in India that thrives in the future without destroying the environment.
Read more about the critical environmental issues surrounding India’s Chemical Sector in ERM's paper (514Kb PDF)
About the Authors
Rupam Raja is a Partner at ERM and is based out of ERM’s Gurgaon Office.
Jaydeep Sathaye is a Partner at ERM and is based out of ERM’s Gurgaon Office.