Small and medium enterprises (SMEs), which make up as much as
30-35 per cent of the industry, have been hit particularly hard.
Specialty
chemicals manufacturers have been left bleeding, as demand from most end-user
industries has dried up in the wake of the Covid-19 pandemic.
Small
and medium enterprises (SMEs), which make up as much as 30-35 per cent of
the industry, have been hit particularly hard.
Many SMEs have reduced capacity utilisation as downstream demand fell, and are
expected to see realisation decline amid lower crude oil prices.
Additionally, SMEs
are having difficulties in accessing working capital, and may face a liquidity
crunch. While the world is slowly opening up, there has been no major recovery
in demand from key end-user industries such as automobiles, electronics and
textiles. We expect demand from the food-packaging and health care segments to
sustain, though.
In this milieu,
exports offer a ray of hope. India’s chemical exports logged a compound
annual growth rate (CAGR) of about 13 per cent between 2015 and 2019,
compared with about 7 per cent for China. The key sub-segments likely to
benefit from higher exports would be colourants and agrochemicals, with export
shares of 45-50 per cent and 50-55 per cent, respectively.
Furthermore,
significant capacity addition in other sub-segments, such as polymer additives,
would help reduce the country’s import dependence.
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