Small and medium enterprises (SMEs) in the domestic chemicals sector are on course for 18-23 per cent revenue growth in the current fiscal year (FY22), mainly owing to recovery in domestic demand and higher realisation due to a rise in the prices of chemicals, stated a report from CRISIL SME Tracker.
Moreover, an ongoing surge in exports as importer-countries reduce their dependency on China and turn to suppliers elsewhere, including India, will support growth. However, India’s second Covid-19 wave will be a key factor that needs to be monitored, CRISIL warned.
China has also been shuttering chemical units to fight rising pollution, which will also serve Indian companies well. SMEs account for 30 per cent of chemicals sector revenue in India.
The rebound in revenue growth follows a 13-15 per cent fall in FY21 due to the demand destruction that followed the onset of the Covid-19 pandemic and a sharp fall in crude oil prices. The fall in demand is also expected to impact margins in FY21.
During April-October 2020, domestic demand plunged, with most end-use sectors grinding to a halt following the lockdown. Exports also declined sharply owing to trade restrictions and a global slowdown. The rebound began in November 2020.
India exports chemicals to pandemic-hit US and Europe. With imports accounting for 20 per cent of domestic consumption, India is a net importer of chemicals, mostly from China.
Chemicals industry SMEs in India enjoy policy support through anti-dumping duties that vary by country and product.