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Investor-friendly Policies Drive Gujarat’s Growth
If there had been no ‘focus’ on the development of the industrial sector in the state, Gujarat wouldn’t have established itself as one of the most preferred locations for industrial investment in India. Apart from sound infrastructure facilities, skilled manpower, excellent domestic and international connectivity and availability of raw materials, the ‘strong will’ of the state is the major factor for the overall growth of this western region, states a recent report by Tata Strategic Management Group released at India Chem Gujarat 2013.

Today, at a domestic market size of ~USD 108 billion the chemical industry in India accounts for only 3.3 per cent of the global chemical market. It is highly diversified with more than 80,000 chemicals and currently accounts for ~11 per cent of India’s industrial output which makes it very crucial for the economic development of the country. The report outlines the demand-supply scenario over the next 5 years and also the key growth drivers.

Gujarat as a state contributes a major share of the country’s chemicals output: 62 per cent of petrochemicals, 51 per cent of chemicals and 35 per cent of pharmaceuticals. The report by Tata Strategic Management Group also highlights the advantage that Gujarat as a state offers with its business friendly policies.

The state government has taken care to set up industrial estates on non-agricultural land after assessment of industrial viability. Such availability of product clusters ensures opportunities across the value chain and facilitates investment in the state.

According to ‘India Chemical Report’ that provides an analysis of key sub-segments of chemical industry such as agrochemicals, fine chemicals, dyes & pigments and other specialty chemicals, Gujarat has achieved an annual growth rate of over 10 per cent p a over the past five years and is one of the most industrialised states of India. It accounts for 17 per cent of the nation’s industrial production and 25 per cent of its exports. The report mentions several advantages highlighting ‘investor-friendly policy’ as the major one.

The chemical industry is today the largest and fastest growing component of Gujarat’s manufacturing sector.

The report focuses on speciality chemical industry in the county and states that specialty chemical industry is a knowledge driven industry and it has been growing rapidly at 2x of GDP growth rate (~12%) over the last five years. It currently stands at ~USD 23 billion. “Domestic demand of specialty chemicals is expected to follow an accelerated growth path. This demand is mostly driven by the strong growth outlook for end use industries. This along with increased adoption of specialty chemicals and newer applications can propel the growth further,” it states further.

Indian Chemical Industry
According to report, chemical industry is a knowledge as well as capital intensive industry. This industry plays a significant role in the global economic and social development. It is also a human resource intensive industry and hence generates huge employment opportunity. Globally, more than 20 million people are expected to employ in this industry. it further states that the diversification within the chemical industry is huge and covers more than eighty thousand commercial products.

Global chemical market size was estimated at USD 3.7 trillion in 2012 and is expected to grow at 4-5 per cent per annum over the next decade to reach ~ USD 5.8 trillion by 2021.

Gujarat State Advantage
This section in the report states the growth story of the state highlighting Gujarat’s contribution to India in the year 2012.

In 2011-12, Gujarat contributed 25 per cent to India’s total exports of goods. Exports include products from sectors such as textiles, petroleum, chemicals, pharmaceuticals, automobile, engineering, gems and jewellery, naphtha, petrol, clinker, cement, oil cakes, bauxite, paraxylene, salt, soda ash, food grains, cement clinker, ethylene, Pet-cock etc. The total cargo handled by the Kandla Port (Only Major port of Gujarat) was 82.5 million tonnes during 2011-12. Gujarat is also the largest exporter of cotton (60%) in the country, it states.

The report lists all the names of the companies working in Gujarat. “The production facilities for some of the largest global and Indian chemical and petrochemicals manufacturers” in the state has driving the growth of the industry for the state. The advantages explained in the report include:

Infrastructure and Strategic Location: Gujarat is well connected by the Indian Railways network and has built one of the best road networks in India. Further, power sufficiency, highest number of airports and second highest number of ports, integrated statewide gas grid, the longest coastline in the country, etc are the other advantages.

Raw Material Availability: Rich availability of natural resources and basic feedstock facilitate production of a large number of downstream chemical products.

Availability of Talent: Gujarat has always been well known for its entrepreneurial talent who have spread their footprint nationally and across the globe.

Impetus for Growth: Integrated development and PCPIR, Upcoming external infrastructure and Support for micro, small and medium enterprises, etc are the other features illustrated in the report.

The 107-page report further classifies the crucial segments of the industry and analyses different markets for Agrochemicals, Fine Chemicals, Dyes and Pigments, and other speciality chemicals such as paints & coatings, construction chemicals, water treatment chemicals, polymer additives, and personal care chemicals.

An analysis on Chemical Technology containing Science & Technology Setup in India, Research & Development expenditure in the year 2012, Recent Investment in India, Research & Technology in Petrochemical sector, role of academia, etc have also been expounded in the report. It further details inadequate Level of R&D and Quality of Education and Training Infrastructure as the key concerns the industry faces today.

The report includes chapters on ‘M&A Opportunities in Indian Specialty Chemicals Industry’, ‘Specialty chemicals in personal care products: Opportunity for unique positioning’, ‘Legacy to Lean - Taking on Challenges Plaguing the Agrochemical Supply Chain’, ‘Opportunities in India in the evolving Global Petrochemical Industry’ and ‘Oleochemicals gaining prominence in speciality chemicals’

Manish Panchal, Practice Head - Chemical & Energy and Charu Kapoor, Engagement Manager – Chemicals, Tata Strategic Management Group authored the ‘India Chemical Report.’