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Scope of Specialty Chemicals in India

Have you ever wondered how fabrics remain wrinkle-free, shrink-resistant or even have a gloss effect? The answer is simple. It’s done with the help of softeners, silicones, resins and polymers which are Specialty Chemicals.

What Are Specialty Chemicals?

Chemical Industry in India is highly diversified, comprising more than 80,000 commercial products. The market size of this industry stood at $178 bn in 2018-19 and is projected to reach $304 bn by 2025. There are two lucrative sub-sectors of Indian Chemical Industry: Basic Chemicals and Specialty chemicals.

Specialty chemicals or effect chemicals are particular chemical products which provide wide variety of effects to other substances that is, they are used to provide a specific attribute to the end-product. Therefore, they are widely referred to as "additives".

How Do Specialty Chemicals Differ From Basic Chemicals?

Basic Chemicals are defined as high volume but low-value products. They are sold to other industries for treating further. They are usually manufactured in continuous process plants and there is no major product differentiation across several manufacturers. Sales of basic chemicals are mainly driven by price.

However, specialty chemicals are high-value, low volume products. These are sold based on their quality or utility, rather than composition. Specialty chemicals are more likely to be prepared and processed in batches. The focus is on value addition to the end-product and the properties or technical specifications of the chemical.

Where Do Specialty Chemicals Find Application?

Some industrial sectors such as automotive, aerospace, food, cosmetics, agriculture, manufacturing, and textiles are highly reliant on specialty chemicals. Thus, they majorly find applications as Agrochemicals, Colourants, Construction chemicals, Flavours and Fragrances, Paints and Coatings, Personal care cosmetic chemicals, Polymer and additives, Bio-based chemicals, Catalysts, Antioxidants, Paper pulp chemicals, Surfactants, Textile chemicals, Oil field chemicals, Water treatment chemicals, Cleaning materials, Lubricants, Dyes and Pigments and others.

Growth Outlook

The principal factor that drives growth in this market is continuous R&D for the improvement of products with optimum and advanced features. The demand is driven by both domestic consumption as well as exports.

A lot of industries depend on specialty chemicals, therefore this market is adequately diversified. Pharmaceutical ingredients accounted for the largest specialty chemicals market share in 2019 and this trend is anticipated to continue during the forecast period.

India is a strong global dye supplier, accounting for approximately 16% of the world production of dyestuff and dye intermediates.

Agrochemical products are expected to account for around one-eighth market share. Growing awareness towards the use of agrochemicals in farming for improving crop yield per acre of land further fuels the growth of the specialty chemicals market.

India’s proximity to the Middle East, the world’s source of petrochemicals feedstock, makes for economies of scale.

Main user essential industries, namely, Textile, Paper, Paint and Coatings will continue to grow because of increasing demands and increase in discretionary spending. The cosmetics and personal care Industry is one of the fastest-growing consumer products sectors in India and this demand is expected to sustain in the long-term.

Sector Risks and Covid-19 Impact

One inherent risk of specialty chemical segment is that they can become subject to regulatory restrictions on manufacturing facilities by the Government to control air pollution. Such example of risk from ESG perspective was seen in Chinese specialty chemicals sector. China was a leading market for specialty chemicals but the "blue sky policy" to remove the manufacturing facilities which produced harmful chemicals impacting the air quality greatly hampered those Chinese companies.

Unpredictable developments and shift in demand patterns showcase another threat to the Specialty Chemical industry. Increasing innovation in the sector in the race to enhance product differentiation may lead to increased costs and operational complexity.

The outbreak of Coronavirus pandemic globally and in India has caused a notable disorder and slowdown of economic activity as buying habits of people are bound to change. Essential verticals like agrochemicals, pharma, fertilizers and FMCG have not seen significant impact of Covid-19 pandemic while others like textile, aviation, electronics, automotive industry, construction witnessed demand contraction and are expected to remain weaker for the medium-term.

Unavailability or volatility in prices of key raw materials and currencies also affect operating margins of Specialty Chemical Companies.


Concluding, the recently launched “Make in India” campaign is also expected to add impetus to the emergence of India as a manufacturing hub for the chemical companies. Persistently, though, specialty chemicals companies are focusing past the traditional cost advantages and concentrating on cost-effective innovation. Product improvement capacities are progressively more important across various segments to differentiate the top and bottom performers.


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