India Chemical Sector Enters A New Industrial Phase

India’s chemicals and petrochemicals industry is becoming a larger pillar of the country’s manufacturing economy, with production, industrial clusters and supporting infrastructure expanding over the past decade. The sector contributed 8.1% of manufacturing gross value added in FY24, while output of selected major chemicals and petrochemicals rose from 45.6 million tonnes in FY16 to 58.6 million tonnes in FY25.

The expansion is increasingly visible through industrial clusters rather than isolated plants. Three Petroleum, Chemicals and Petrochemicals Investment Regions at Dahej, Visakhapatnam-Kakinada and Paradeep currently account for 2,246 functional chemical units, cumulative investment of ₹3.49 lakh crore and around 3.7 lakh jobs, according to government data. These clusters are designed around shared infrastructure, allowing manufacturers to access common utilities and services while reducing some of the costs associated with establishing individual facilities.For the India chemical sector, this concentration has an important urban dimension.Large industrial zones require roads, rail connections, ports, water systems, waste treatment and reliable power. They can create employment and support downstream businesses, but they also place pressure on surrounding settlements and natural resources.

Industrial expansion therefore needs to be matched by infrastructure that protects public health and manages hazardous materials safely.The next phase is already being shaped by new public investment. The Union government has approved the BHAVYA Rasayan scheme with a ₹3,030 crore outlay to establish three dedicated chemical parks. The programme includes funding for common infrastructure and basic utilities, with implementation planned over five years from FY27 to FY31.Plastic manufacturing is also being reorganised around dedicated clusters. The Department of Chemicals and Petrochemicals has approved 10 Plastic Parks, although their implementation remains at different stages. Such facilities can improve access to common infrastructure, but their long-term value will depend on whether waste management, recycling and resource efficiency are built into industrial planning rather than treated as downstream problems.

Environmental pressures are becoming harder to separate from industrial competitiveness. The 2026-27 Budget has proposed support for carbon capture, utilisation and storage across several hard-to-abate sectors, including chemicals. Such technologies could help reduce emissions, but they will need to complement energy efficiency, cleaner power, material circularity and stronger pollution-control systems rather than substitute for them. The India chemical sector is consequently moving towards a larger and more integrated manufacturing footprint. The economic opportunity is substantial, particularly for jobs and downstream industries. But the next measure of success should extend beyond investment and capacity: resilient infrastructure, safer industrial neighbourhoods, responsible water use and lower-carbon production will determine whether chemical growth can coexist with healthier and more liveable cities.

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India Chemical Sector Enters A New Industrial Phase