The Petrochemical Ticket to Future Economic Success in India

Decision-makers in the Indian government have their eyes on a big economic milestone, to be reached in the next few years: a GDP of $5 trillion. In pursuit of this goal, India’s petrochemical industry has been ear-marked as the sector most capable of kicking the nation’s economy into this next gear.  

Globally, of course, something similar is happening. With the ongoing rise of alternative fuels, petrochemicals are set to become the world’s primary form of oil consumption. Indeed, according to the International Energy Agency, this industry will account for almost 50% of the growth in demand for oil by 2050. Perspicacious actors like China, which has become the world’s preeminent petrochemist over the preceding decade, have successfully bet on this shift in appetites – and now, with its ascendant economy, world-rivalling skills-base and technological wizardry, India are throwing their hat into the O-ring. 

Both public and private Indian oil firms have committed significant investment schedules to the expansion of their petrochemical portfolios, with government-initiatives under the banner of Aatmanirbhar Bharat Abhiyan, or Indian Self-Reliance, spear-heading further investments. Firms are dramatically leveraging all of their available resources to produce basic petrochemicals, like ethylene, propylene, butadiene, and aromatics. By 2035, twenty petroleum refineries will have been renovated into petrochemical plants. 

Such widespread enthusiasm for the business has prompted analysts to forecast a compounding annual growth rate of 9-10% for the sector over 20 years. Already, India ranks as the sixth-largest region for petrochemicals in the world business. It's believed that a vertical integration of Indian petroleum activities with petrochemicals could radically change the global marketplace and secure India’s appropriation of value across the entire chain of polymer molecules. 

On the whole, India’s petrochemical strategy aims at a reduction of imports, which has thus far been the only means of satisfying the high demand for polymer products. As things stand, it’s an up-hill battle: India’s import-dependency remains at 50% for petrochemical intermediates or derivatives. Counter-offensive strategies have been floated, including encouraging downstream firms to expand capacity by entering into joint ventures. There are some positive indicators, however, including the fact that over half of India’s chemical exports in 2022 where specialty chemicals, an accounting category that includes petrochemicals. Further, an increasing appetite for high-performance petroleum-based materials in India’s automotive, construction, and textile industries are driving an up-swell in the domestic intermediates market.  

Now, there are concerns over the ways in which such furious development might conflict with the objectives of sustainability. Nobly, India has joined over 150 countries in taking steps towards the complete eradication of single-use plastics, funding efforts to proliferate alternatives and encourage recycling. This is an ongoing issue for the global petrochemical industry, though circular, sustainable solutions are emerging. Perhaps, India’s advantage over its competitors in its bid for petrochemical dominance may just lie in recycled or alternative feedstocks and circular polymers. 

All things considered, then, the Indian petrochemical sector appears to be on the cusp of explosive growth. In the over-heated wake of the 20th century’s fossil-fuelled growth, petrochemicals will be oil’s last hurrah: will India grasp the opportunity?