19 March 2003 18:33 [Source: ICIS news]
Parts of India’s chemical industry have done exceptionally well in recent years and there clearly is a desire across the sector – from basic chemicals to pharmaceuticals and biotechnology, the so-called knowledge-based segments – to replicate that success. The recent research* from business adviser KPMG for industry body the Chemtech Foundation spotlights just what could be achieved, and how, if the conditions were right, chemicals could make great strides over the rest of this decade.
KPMG’s and Chemtech’s ‘Vision 2010’ scenario is clearly aspirational but can be read as a wake up call to entrepreneurs, existing players and to government. The scenario produced from the research suggests the chemical industry has the potential to grow to be worth around $100bn (Euro93bn) by 2010, which would be close to 12% of gross domestic product (GDP) compared with a current share of 6.7% worth $28bn.
To achieve that GDP share would require significant annual growth rates in the more specialised and knowledge intense segments with continued, relatively strong growth in the basics in international terms. The $100bn goal would need sector growth of 15.5% a year and demands that the specialty and ‘knowledge’ chemicals segments grow at 16.4% and 27% per annum, respectively, compared to current rates of 7.9% and 12.3%. Over the period, basic chemicals need to maintain current growth rates of 7.7%.
The forecaster’s base case scenario is for the sector to continue to grow at current rates and be worth about $60bn in 2010, increasing its GDP contribution to 7.1%.
India has lagged behind China in the development of its biotechnology industry over the past decade and its pharmaceuticals and speciality chemicals segments are highly fragmented. But the driving force behind the aspirational scenario is the assumption that things can change and that there could be much more consolidation among the country’s 23 000 licensed pharmaceutical manufacturers. Indeed India’s structural problems in chemicals/pharmaceuticals and its clear infrastructure disadvantages would have to be overcome if growth rates anything like those talked about here are to be achieved.
But India has significant untapped potential as evidenced by the KPMG analysis, which was based on interviews with more than 70 industry executives in 2002. In the biotechnology field alone, the country has 3m graduates, 700 0000 postgraduates and 1500 PhDs in biosciences and engineering. About 10% of researchers and 15% of scientists active in research and development in the US pharmaceuticals and biotechnology sectors are from India.
Chemtech and the business analysts suggest, not unsurprisingly, that a great deal would have to change outside the industry – in government and the way in which the industry interacts with institutions – if the aspirational targets are to be matched. But the two organisations appear confident that given concerted effort, the sector can expand significantly and become much more profitable. Indeed, a few proactive Indian companies have created sizeable operations and are active internationally. There are significant opportunities for more to follow suit.
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