Saheb Ahmed, MD, professor of chemical engineering and director, Centre for Chemical Industry Studies, Ahmedabad University, Ahmedapuram, India said: “The chemical industry is a key sector for India in terms of employment and productivity and this is the most vulnerable sector.
The sector has suffered from a number of factors over the last decade, including the introduction of stringent regulatory and safety requirements.
The introduction of a comprehensive Goods and Services Tax (GST) will bring greater stability in the industry.
However, it will have a major impact on the overall competitiveness of the industry and the overall level of investment and manufacturing.”
The sector has seen a decline in manufacturing output in recent years due to the introduction and rollout of GST, which has been criticised by some in the field of industry.
In a recent study by the National Institute of Chemical Technology, the sector experienced a decline of 6.3 per cent in manufacturing value added over the year ending March 2017, against a rise of 5.9 per cent over the previous year.
In addition, the number of new chemical manufacturing units has declined by over 30 per cent.
According to the report, the industrial sector witnessed a 12 per cent increase in manufacturing employment between 2013 and 2015, with the increase being due to a number from the manufacturing sector that were brought on board after the introduction.
The study also noted that in 2014, the share of the chemical industry as a whole was projected to increase by 8 per cent to 21.5 per cent, with a significant impact on exports.
The country has been in the process of rolling out GST from July 1.
This will allow greater flexibility in manufacturing.
However the final GST rate for the chemical sector is expected to be between 25 per cent and 30 per to 35 per cent depending on the type of products, according to the study.
“GST has not only impacted the chemical manufacturing sector, but also the manufacturing and industrial sectors,” Ahmed said.
“There is a lot of uncertainty regarding the impact GST will have on the sector, especially as there is uncertainty on the regulatory framework.
This uncertainty is reflected in the low number of manufacturing units and the high level of manufacturing imports, as compared to the other sectors.”
The chemical sector has witnessed a decline across India and the world.
In the United States, the industry was in decline for decades.
It was first targeted for the government in 1947 by then President William Howard Taft.
It saw its output fall from 18.3 billion tonnes in 1947 to just 7.6 billion tonnes by 1960.
In 2020, its output was estimated at just 7 billion tonnes.