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By:

Akhilesh Sinha

25 June 2025 at 2:53:54 pm

Nadda's strategic meet signals urgency for chemical sector

New Delhi: As war simmers across the volatile landscape of West Asia, whether in the form of a direct confrontation between Israel, United States and Iran, or through Iran's hybrid warfare involving groups like Hezbollah and the Houthis, the tremors are no longer confined to the region's borders. They are coursing through the arteries of the global economy. India's chemicals and petrochemicals sector, heavily dependent on this region for critical raw materials, finds itself among the earliest...

Nadda's strategic meet signals urgency for chemical sector

New Delhi: As war simmers across the volatile landscape of West Asia, whether in the form of a direct confrontation between Israel, United States and Iran, or through Iran's hybrid warfare involving groups like Hezbollah and the Houthis, the tremors are no longer confined to the region's borders. They are coursing through the arteries of the global economy. India's chemicals and petrochemicals sector, heavily dependent on this region for critical raw materials, finds itself among the earliest and hardest hit by this geopolitical turbulence. It is in this backdrop that the recent meeting convened by Union Minister for Chemicals and Fertilisers J. P. Nadda at Kartavya Bhavan must be seen not as a routine consultation, but as a signal of strategic urgency. India's ambition to scale this sector from its current valuation of $220 billion to $1 trillion by 2040, and further to $1.5 trillion by 2047, will remain aspirational unless the country confronts its structural vulnerabilities with clarity and resolve. India today ranks as the world's sixth-largest producer of chemicals and the third-largest in Asia. The sector contributes 6-7 percent to GDP and underpins a wide spectrum of industries, from agriculture and pharmaceuticals to automobiles, construction, and electronics. It would be no exaggeration to call it the backbone of modern industrial India. Yet, embedded within this strength is a paradox. India's share in the global chemical value chain (GVC) stands at a modest 3.5 percent. A trade deficit of $31 billion in 2023 underscores a deeper issue: while India produces at scale, it remains marginal in high-value segments. This imbalance becomes starkly visible when disruptions in West Asia choke the supply of key feedstocks, shaking the very foundations of domestic industry. Supply Disruption The current crisis has laid this fragility bare. Disruptions in the supply of LNG, LPG, and sulfur have led to production cuts of 30-50 percent in several segments. With nearly 65 percent of sulfur imports sourced from the Middle East, the ripple effects have extended beyond chemicals to fertilisers, plastics, textiles, and other downstream industries. Strategic chokepoints such as the Strait of Hormuz have witnessed disruptions, pushing shipping costs up by 20-30 percent and adding further strain to cost structures. This is precisely where Nadda's emphasis on supply chain diversification and resilience appears prescient. In today's world, self-reliance cannot mean isolation; it must translate into strategic flexibility. While India imports crude oil from as many as 41 countries, several critical inputs for the chemical industry remain concentrated in a handful of sources, arguably the sector's most significant vulnerability. Opportunity Ahead A recent report by NITI Aayog outlines a pathway to convert this vulnerability into opportunity. It envisions raising India's GVC share to 5-6 percent by 2030 and to 12 percent by 2040. If achieved, the sector could not only reach the $1 trillion mark but also generate over 700,000 jobs. However, this transformation will demand more than policy intent, it will require sustained investment and disciplined execution. The most pressing challenge lies in research and innovation. India currently spends just 0.7 percent of industry revenue on R&D, compared to a global average of 2.3 percent. This gap explains why the country remains largely confined to basic chemicals, even as the world moves toward specialty and high-value products. Bridging this divide is essential if India is to climb the value chain. Equally constraining is the fragmented nature of the industry. Dominated by MSMEs with limited access to capital and technology, the sector struggles to compete globally. Cluster-based development models offer a pragmatic way forward, such as PCPIRs and the proposed chemical parks.

Guns of Independence

While India has made big strides in defence self-reliance, a truly ‘Atmanirbhar’ military machine remains elusive.

India likes to see itself as a rising power, capable not only of defending its borders but also of shaping security beyond them. For that ambition, self-reliance in defence is a necessity. Over the past decade, successive governments in New Delhi have spoken the language of ‘Atmanirbharta’ (self-reliance), tying it to the broader ‘Make in India’ campaign. On paper, the progress is striking: defence production has surged to Rs. 1.51 trillion, exports have risen tenfold in less than a decade to more than Rs. 23,000 crore, and Indian-made platforms from artillery guns to radar systems are finding buyers as far afield as the United States and France.


Yet statistics, however dazzling, can be deceptive. True Atmanirbharta is not measured merely by output or export numbers but by the ability to design, develop and sustain advanced technologies without recourse to foreign suppliers. By that yardstick, India is still some distance from its goal as the gap between aspiration and reality remains wide.


Self-sufficiency mirage

India’s defence industry has long been defined by dependence. During the Cold War, Moscow supplied the bulk of its hardware. Even today, Russia remains India’s largest supplier, though its share has declined as New Delhi diversifies. French fighter jets, American transport aircraft and Israeli drones dot Indian inventories. Even when equipment is ‘indigenously produced,’ critical components often come from abroad. Fighter engines, advanced sensors, jet trainers and submarines are all still imported in varying degrees.


The government deserves credit for narrowing this gap. The Defence Acquisition Procedure has been revised to privilege domestic suppliers, a negative import list bans procurement of certain categories from overseas, and industrial corridors are being set up in Uttar Pradesh and Tamil Nadu. Yet India’s climb towards self-sufficiency is slowed by stubborn obstacles.


Stumbling blocks

The first is infrastructure. Defence production demands reliable power, fast transport links and robust supply chains. Too often, Indian manufacturers face bottlenecks that delay deliveries and inflate costs. The second is skills. A large share of the workforce lacks the training needed for high-precision manufacturing or for research in advanced domains such as artificial intelligence, hypersonics and quantum technologies. Skilling programmes exist, but they lag behind the pace at which the sector is expanding.


Finance is another stumbling block. Access to capital for small and medium enterprises is cumbersome. For many firms, navigating procurement red tape is as challenging as developing the product itself.


A fourth weakness lies in regulation. Defence remains overburdened with approvals, certifications and quality checks that are lengthy, opaque and prone to bureaucratic delay. While designed to safeguard standards, the process too often strangles innovation.


Finally, innovation itself remains thin. India spends barely 0.7 percent of GDP on research and development across all sectors, far less than China or Israel. Within defence, public sector undertakings dominate, while private firms and start-ups face hurdles in accessing research grants or testing facilities.


Bridging these gaps will require a mix of persistence and imagination. The state must spend more on research, but also change how it spends by opening laboratories and test facilities to private firms, universities and start-ups. Competition should be encouraged between public-sector giants and nimble private players, not stifled.


The workforce must be upgraded through large-scale skilling initiatives that link universities, technical institutes and industry. India’s young demography is an asset; but without specialised training, it risks being squandered. The Strategic Partnership model, envisaged as a mechanism to pair Indian firms with global giants for technology transfer, must be made to work. Too often, such schemes get stuck in paperwork or mistrust. Successful partnerships could help India master technologies from jet engines to undersea warfare systems.


Defence start-ups should be given easier access to credit lines and venture funds, backed by government guarantees. Procurement should be streamlined, with single-window clearances replacing the tortuous approval maze.


India should also court foreign direct investment more openly. A more liberal FDI regime could bring not just capital but also know-how. The aim should not be to shun foreign firms but to embed them into local supply chains, gradually building domestic competence.


Exports, meanwhile, must be scaled up not only for commercial gain but also as an instrument of diplomacy. Supplying equipment to partners in Africa, Southeast Asia and the Indian Ocean will expand India’s influence and create leverage against rivals such as China, which is aggressively marketing low-cost arms in many of the same markets.


The government’s target of Rs. 3 trillion in defence production and Rs. 50,000 crore in exports by 2029 is ambitious but not implausible. Ultimately, Atmanirbharta must not become an exercise in protectionism or accounting triumphalism. It should be judged by whether India can design and produce next-generation systems on its own, whether drones that can match Chinese swarms, or naval platforms that can secure sea lanes without imported engines. India is better placed today than ever before to reach that standard. But the road to true self-reliance is long, steep and strewn with obstacles. Dreams of a global role rest on whether it can master that climb. They demand relentless execution.


(The author is a retired Naval Aviation Officer and a defence and geopolitical analyst. Views personal.)

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