India's Petrochemical Sector Forecasts Robust Growth Driven by Domestic Demand and Capacity Expansion
India's petrochemical consumption is projected to grow robustly at 6-7% annually, driven by economic expansion and downstream demand. A CareEdge Ratings report highlights a strategic push to reduce import dependence through significant capacity expansion, particularly in polypropylene, aiming for self-sufficiency by FY30. While growth is strong, the sector faces near-term challenges from global oversupply and weak product spreads. Long-term profitability hinges on cost competitiveness, favorable global market conditions, and government support amid continued global capacity additions.
India's petrochemical sector anticipates robust domestic consumption growth of 6-7 percent annually in the medium term, fueled by economic expansion and steady demand from downstream industries, as per a CareEdge Ratings report. Given past limited domestic capacity additions and rising import dependence, a key strategic priority is now reducing reliance on foreign supply. Both public and private sector companies have announced ambitious plans for significant capacity expansion across major petrochemical segments. For instance, polypropylene (PP) capacity is expected to nearly double (1.8 times) between FY25 and FY30, outpacing demand growth (1.4 times) and potentially eliminating import dependence for PP by FY30.While these capacity additions are vital, the report stresses that cost competitiveness will be paramount for domestic players. Sustaining product spread recovery and earning reasonable returns on large capital investments will hinge on operational efficiency, global market conditions, and pricing dynamics. In the near term, the sector faces challenges from weak prices and spreads due to global oversupply, particularly from China's extensive capacity expansions that have outstripped demand. This mismatch, coupled with competition from cheaper Chinese imports, has pressured Indian manufacturers' operating profitability over recent years. Marginally improved profitability in H1FY26 was primarily due to lower crude oil input costs. Ultimately, achieving optimal operating profitability, despite strong consumption growth, will depend on improved cost competitiveness, favorable global demand-supply conditions, and necessary government support.
