Prasol Chemicals

India is expected to remain one of the fastest-growing specialty-chemical markets in Asia as global customers diversify sourcing and domestic manufacturers invest in capacity, backward integration and higher-value products. Growth is being supported simultaneously by local consumption and export opportunities, while tightening environmental standards and higher costs in China continue to encourage supply-chain diversification.

The key drivers are:

• Domestic market scale: The Indian specialty-chemicals market increased to approximately INR 556,300.0 Cr in FY26 from INR 224,000.0 Cr in FY19 and is projected to reach INR 754,100.0 Cr by FY29, implying an industry growth range of about 10%-12%

• Asia growth differential: India is projected to grow about 10%-12% during 2025-2029 versus roughly 5% for China, 6% for Taiwan, 4.5% for South Korea and 3% for Japan, positioning India as the fastest-growing major Asian market in the source comparison

• APAC demand pool: Asia-Pacific represented about 52% of the global specialty-chemicals market in CY25. The regional application market was approximately USD 645.0 Bn, including USD 67.0 Bn of performance chemicals, USD 82.0 Bn of agrochemicals and USD 50.0 Bn of home and personal care chemicals

• Investment cycle: CareEdge estimates more than INR 16,100.0 Cr of specialty-chemical capital expenditure over FY24-FY26, directed toward capacity expansion, backward integration and new-product development as manufacturers respond to domestic demand and China+1 opportunities

Performance chemicals benefit from a diversified demand base rather than a single end market. Agriculture, industrial processing, construction, automotive, personal care and textiles all require additives and functional chemicals that improve durability, efficiency, safety or product performance. This diversification reduces dependence on one demand cycle, while tighter environmental standards and more complex formulations increase the need for higher-performance chemistry.

The key drivers are:

• Global market expansion: The global performance-chemicals market reached approximately USD 112.0 Bn in CY25 and is projected to reach USD 149.0 Bn by CY29, supported by automotive, construction, electronics, healthcare and industrial demand

• Agriculture demand: Indian performance chemicals used in agriculture are projected to increase from approximately INR 10,090.0 Cr in FY26 to INR 14,150.0 Cr by FY29, supported by crop intensity, specialty agro-inputs and the need for better input efficiency

• Industrial and infrastructure applications: Industrial-process applications are projected to reach approximately INR 11,690.0 Cr by FY29, while construction applications are expected to increase from about INR 4,310.0 Cr in FY26 to INR 5,700.0 Cr by FY29

• Automotive and consumer applications: Automotive applications are projected to reach approximately INR 4,590.0 Cr by FY29, while personal-care and textile applications are projected at about INR 3,700.0 Cr and INR 3,500.0 Cr, respectively, widening the addressable demand pool for functional additives

Acetone derivatives form a sizeable specialty-chemical value chain because acetone is used both directly as a solvent and indirectly as a feedstock for derivatives used in coatings, plastics, adhesives, pharmaceuticals, personal care and industrial chemicals. Indian demand is supported by construction, automotive production, industrial coatings, drug manufacturing and higher consumption of specialty solvents and intermediates.

The key drivers are:

• Indian market growth: The Indian acetone-derivatives market is estimated at approximately INR 8,390.0 Cr in FY26, up from INR 3,560.0 Cr in FY19, and is projected to reach about INR 10,500.0 Cr by FY29

• Global opportunity: The global acetone-derivatives market was approximately USD 24.6 Bn in CY25 and is projected to reach about USD 28.5 Bn by CY29; Asia-Pacific represented roughly 59% of the global market in CY25

• Indian application mix: Paints and coatings account for about 45% of the FY26 Indian acetone-derivatives market, equivalent to approximately INR 3,760.0 Cr; adhesives account for 17%, chemicals 15%, pharmaceuticals 10%, cosmetics/personal care 5% and other applications 8%

• Value-chain breadth: Direct acetone use is estimated at 70%-80% of consumption, while 20%-30% is used indirectly through derivatives such as MMA, Bisphenol A, IPA and specialty chemicals, creating exposure to both industrial and consumer-facing demand.

Specialty chemicals can generate attractive margins and customer stickiness, but the sector is exposed to raw-material volatility, imported feedstocks, environmental regulation and long qualification cycles. Economics can change quickly when crude-linked inputs, freight or foreign exchange move sharply, while global oversupply can compress product spreads. Chemical manufacturing is also inherently EHS-intensive, so disruptions, plant shutdowns or tighter compliance requirements can materially affect utilisation and cost structures.

The key risks are:

• Feedstock and energy volatility: Acetone, phosphorus, petrochemical intermediates, power and freight can move materially with global commodity cycles, creating spread and inventory risk when selling-price pass-through is delayed

• Import and geopolitical exposure: Parts of the Indian chemical value chain remain dependent on imported feedstocks and intermediates; disruption in trade routes, currency movements or geopolitical events can affect availability and landed cost

• Environmental and safety intensity: Manufacturing requires pollution-control consents, hazardous-waste management, factory approvals and emergency-preparedness systems. Stricter domestic or export-market standards can increase capex, compliance cost and time-to-market

• Global competition and price pressure: China+1 supports Indian sourcing, but Chinese and global producers retain substantial scale. Periods of excess global capacity or weaker end-market demand can create aggressive pricing and margin compression

• R&D and customer qualification risk: Specialty products require process development, pilot trials, customer testing and commercial qualification; new product pipelines can take time to scale and do not automatically convert into recurring revenue

Government support for chemicals is primarily aimed at attracting investment, improving domestic manufacturing, building common infrastructure, facilitating exports and strengthening safety standards rather than providing a guaranteed subsidy to individual manufacturers. The policy direction is supportive of import substitution and global supply-chain diversification, but benefits depend on product eligibility, compliance and actual investment. Importantly, the chemicals/petrochemicals PLI discussed in the industry report remains proposed and should not be treated as a notified current benefit.

The key policies are:

• FDI framework: Up to 100% foreign direct investment is permitted under the automatic route in the chemical sector, except for hazardous chemicals, lowering approval barriers for international investment and technology participation

• Make in India / Atmanirbhar Bharat: Domestic-manufacturing and import-substitution policies, together with the National Policy on Petrochemicals and skill-development initiatives, support local capacity creation. In performance chemicals, domestic production is projected to exceed 60% of consumption by FY26 while imports decline toward 35%-40%

• PCPIR infrastructure: Petroleum, Chemicals and Petrochemicals Investment Regions provide integrated chemical-manufacturing zones with common infrastructure, logistics connectivity and backward/forward linkages intended to improve scale and competitiveness

• Bulk Drug Parks: The Bulk Drug Park programme supports domestic API and intermediate manufacturing through common infrastructure such as effluent-treatment plants and solvent-recovery systems, indirectly strengthening the pharmaceutical-intermediates ecosystem

• Export facilitation: RoDTEP rebates unrefunded embedded duties and taxes on exported products, while Advance Authorisation supports duty-free import of inputs used for exports. RoDTEP benefits for Advance Authorisation holders, EOUs and SEZ exporters were reinstated effective June 1, 2025 after a temporary suspension

• Safety-regulation harmonisation: The proposed merger of the Manufacture, Storage and Import of Hazardous Chemical Rules with the Chemical Accidents emergency-planning framework is intended to streamline compliance and strengthen risk-management standards across hazardous-chemical operations