India could potentially emerge as a global supply hub for chemicals, having demonstrated strong cost competitiveness and market attractiveness over the last five years, said a report by McKinsey & Company released in association with the Indian Chemical Council

The report highlights India’s major contribution of 16 specialty chemical sub-segments, including flavours, fragrances, food, and nutrition-based chemicals in the chemical supply. It says that despite dropped industry margins and the impact of macroeconomic pressures, revenue growth remains encouraging.

Going further, the report added, “Strong macroeconomic fundamentals, abundant talent, and India’s low-cost manufacturing advantage position the industry for future growth.” “Despite increased competition, moderating industry demand, and geopolitical uncertainties, Indian chemicals companies have substantial long-term value creation potential,” the report added.

What Else Did The McKinsey Report Said?

The industry seems positioned as a relatively resilient, high-growth market, garnering global demand, the report added. According to the report, the chemical industry’s revenues grew at a CAGR (compound annual growth rate) of about 10.5 percent between fiscal years 2018 and 2024, compared to India’s GDP growth of around 9 percent during the same period, which shows the potential of the sector.

The food and nutrition section has performed well, with strong revenue and EBITDA growth driven by rising consumer demand in the past five to six years for premium and organic food ingredients.

Paints and coatings, flavours and fragrances, amines, adhesives, and sealants grew rapidly due to product diversification and geographical expansion, although margin growth was limited. The paints and coatings segment benefited from industrial coatings (around 30 percent of total segment revenue), supported by robust growth in consumer durables, automobiles, and allied industries.

Meanwhile, the amines industry faced volatility in raw material prices (alcohols, ammonia, and acetic acid), impacting profitability. Conversely, segments such as agrochemicals, plastic additives, surfactants, inorganics, dyes and pigments, and lubricants and fuel additives have struggled with weak revenue and EBITDA performance.

As per the report, India’s household consumption nearly doubled over the last decade to USD 2.14 trillion in fiscal year 2024.

The country is expected to emerge as the world’s third-largest consumer market by 2026.41 Domestic demand for various chemicals end-segments including cosmetics, automobiles, packaged food, and consumer durables, is of global scale and relevance. India’s consumer durables industry is expected to grow to USD 60 billion by 2030, making it the world’s fourth-largest industry by 2027, the report added.