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...

min read

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.

What happens now that India has suspended the Indus Water Treaty with Pakistan?

Correspondent
Apr 24, 2025
3 min read

In a major diplomatic and strategic shift, India on Wednesday suspended the Indus Waters Treaty (IWT) with Pakistan. This move came just a day after a deadly terrorist attack in Jammu and Kashmir’s Pahalgam, where 26 people, including tourists, were killed. The decision was taken during a high-level Cabinet Committee on Security (CCS) meeting, chaired by Prime Minister Narendra Modi and attended by Union Home Minister Amit Shah.

The suspension is one of five key punitive steps taken by India in response to the terror attack, signaling a significant escalation in its stance towards Pakistan. But what does this mean for both countries, and what are the potential consequences?

The Indus Waters Treaty: A Brief Overview

Signed in 1960 and brokered by the World Bank, the Indus Waters Treaty governs the sharing of the Indus River and its tributaries between India and Pakistan. The river system consists of six major rivers — the Ravi, Beas, and Sutlej (Eastern Rivers) and the Indus, Jhelum, and Chenab (Western Rivers).

India, as the upper riparian country, controls the flow of these rivers before they enter Pakistan.

The treaty granted India control over the Eastern Rivers, while Pakistan was allotted the waters of the Western Rivers. Despite multiple wars and diplomatic crises, the IWT had remained intact for over six decades, considered a rare example of successful conflict resolution between the two neighbors.

Why Is the Treaty Being Suspended?

India’s decision to suspend the treaty follows rising tensions over Pakistan-based terrorism. The latest attack in Pahalgam prompted calls for stronger retaliatory action. According to Pradeep Kumar Saxena, a former Indus Water Commissioner for India, this move could be a precursor to a full abrogation of the treaty.

While the Indus Waters Treaty itself does not have a provision for unilateral termination, India could rely on Article 62 of the Vienna Convention on the Law of Treaties. This article allows treaties to be ended or modified due to “fundamental changes of circumstances,” which India may argue includes ongoing acts of terrorism originating from Pakistan.

What Can India Do Next?

India had already issued a notice to Pakistan in 2023 seeking to review and amend the treaty. With the suspension in place, India now has more room to maneuver. Several projects, particularly in Jammu and Kashmir, had faced constraints under the treaty’s terms. These include limitations on dam designs, storage capacities, and reservoir flushing practices.

India can now potentially bypass those restrictions. For example, under the treaty, reservoir flushing — a technique used to remove sediment buildup — had tight rules, especially regarding timing. These restrictions are no longer binding, giving India flexibility to manage its dams and reservoirs as it sees fit.

Importantly, this could affect Pakistan’s irrigation patterns. The sowing season in Pakistan’s Punjab region heavily relies on a steady flow of water from the Western Rivers. Any changes in timing or volume of water releases could harm agriculture.

India may also stop sharing crucial flood data with Pakistan — a key provision of the treaty. This information helps Pakistan prepare for monsoon-related flooding. Without it, the risk of natural disasters could increase.

What About Existing and Future Projects?

In the past, Pakistan raised objections to nearly every Indian hydroelectric project on the Western Rivers, including Kishanganga, Ratle, and Baglihar.

But if the treaty is no longer honored, India could go ahead with these projects without Pakistani input. This would be a major change in the way infrastructure is developed in the region.

India could also start new projects in Jammu, Kashmir, and Ladakh that were earlier stalled or delayed due to treaty constraints. After the Pulwama attack in 2019, India had already approved eight new hydropower projects — now these could move forward more aggressively.

A New Era of Water Diplomacy?

The suspension of the treaty could halt the regular visits and inspections between Indian and Pakistani officials that were mandatory under the agreement. It also represents a serious challenge to peace in the region. The boundary between the two nations runs right through the Indus Basin — any disruption in water sharing could have long-term consequences for agriculture, drinking water, and even diplomacy.

As things stand, this move could mark the beginning of a new and uncertain phase in India-Pakistan relations — one where water, already a scarce resource, becomes a new battleground in an already fragile equation.