India-US, India-EU FTAs Enhance Domestic Chemical Sector Competitiveness and Outlook
India's chemical industry is set for improved export competitiveness and growth, thanks to India-USA and India-EU Free Trade Agreements (FTAs). These agreements offer a level playing field with developing nations and duty benefits against China, strengthening India's global supply chain position. Additionally, potential reductions in China's chemical overcapacity could further boost commodity chemical profitability. While 3QFY26 saw mixed performance, stable raw material prices and lower freight costs supported the sector, with diversified companies poised for greater benefit.
The Indian chemical sector is experiencing a significant uplift in its outlook, primarily driven by the Free Trade Agreements (FTAs) with the USA and the European Union. These FTAs are crucial for improving the industry's export competitiveness by providing Indian chemical companies a level playing field with other developing nations and offering benefits through duty differentials with China. This enhanced market access is expected to fortify India's position in global chemical supply chains and foster long-term growth for the sector. However, the report notes that the overall outlook will remain company-specific, favoring entities with diversified product portfolios and robust operational strengths capable of capitalizing on emerging opportunities. Further optimism stems from ongoing discussions around China's Anti-Involution Policy, which, if successful in addressing overcapacity issues, could significantly improve the outlook for commodity chemicals over the next 2-3 years. China's historical oversupply has previously exerted considerable pressure on global prices, and a rebalancing of supply and demand would lead to better pricing conditions and enhanced profitability for chemical companies worldwide, including those in India. Despite an uneven performance in 3QFY26, the sector found support from several positive factors. These included strong profitable growth in specific areas, the successful ramp-up of recently created capacities backed by dedicated orders, stable raw material prices, and reduced freight costs, all contributing to offsetting some global pressures and helping companies improve efficiency and maintain competitiveness.
