CareEdge: India's Petrochemical Consumption to Grow 6-7% Annually Amidst Capacity Expansion
CareEdge Ratings forecasts India's petrochemical consumption to grow 6-7% annually in the medium term, driven by economic expansion and downstream demand. This strong growth necessitates aggressive capacity expansion plans to reduce import dependence. While polypropylene capacity is set to outpace demand, profitability remains challenged by global oversupply, particularly from China, and hinges on cost competitiveness, operating efficiency, and supportive government policies despite a slight recovery in H1FY26 due to lower input costs.
CareEdge Ratings projects a robust 6-7% annual growth in India's domestic petrochemical consumption over the medium term. This expansion is primarily fueled by the country's economic growth and consistent downstream demand across key petrochemical segments, signaling long-term demand stability. A critical driver for strategic action within the sector is India's significant import dependence, prompting both public and private entities to announce substantial capacity expansion initiatives for major petrochemical products.A notable development is the anticipated surge in polypropylene (PP) capacity, expected to grow 1.8 times between FY25 and FY30, significantly surpassing the 1.4 times demand growth for the same period. This aggressive expansion is projected to considerably reduce India's reliance on PP imports by FY30. However, CareEdge cautions that merely increasing capacity will not guarantee profitability. Cost competitiveness remains paramount, with sustained product spread recovery and returns on large investments being contingent on operational efficiency, global market dynamics, and pricing strategies.In the near term, global oversupply, predominantly from China, is expected to exert downward pressure on prices and spreads, consequently impacting the profitability and margins of Indian manufacturers due to intense competition from cheaper imports. Despite these pressures, operating profitability saw a marginal recovery in H1FY26, aided by a reduction in input costs due to falling crude prices. India experienced healthy growth in major petrochemical consumption, including polymers, aromatics, and elastomers, but limited domestic capacity additions during this period meant continued high import dependence. To address this gap, domestic producers have now outlined large-scale expansion programs, with long-term profitability ultimately depending on enhanced cost competitiveness, favorable global market conditions, and targeted government support.
