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Indian Chemical Industry - Financial Outlook 2009
Frost & Sullivan, June 2009, Pages: 41
This Frost & Sullivan research service titled Indian Chemical Industry - Financial Outlook 2009 provides the impact of the global financial slowdown on the Indian chemical industry and offers strategies to rebound from this situation. Providing critical clarity on the industry outlook, Frost & Sullivan enables the industry participants to take informed decisions during these uncertain times. In this research, Frost & Sullivan's expert analysts thoroughly examine the following markets: commodity and specialty.
Market Overview
Rising Domestic Demand to Bail out the Indian Chemicals Industry
The global economic slowdown and the monetary tightening measures by the Reserve Bank of India (RBI) have caused a dip in the domestic demand for the Indian chemical industry. So much so, that the industry, which had registered a growth of 14.9 percent in Q3 2007, declined by 4.7 percent in the corresponding period of 2008. Although the RBI eased its policies in Q2 2008, the global economic downturn and volatility in raw material prices exacerbated the industry condition. The impact of the financial crunch was also witnessed in the Indian stock market indices, which declined by nearly 55 percent from their peak levels in January 2008. However, the downturn can be used to the industry's advantage, as valuations have become attractive to companies looking to merge with other companies.
Furthermore, the domestic demand, which is higher than the export shipment, is expected to improve. Various government initiatives such as 2 percent cuts in excise duty and service tax that favor production are expected to restore balance to the industry. The government has also increased the foreign direct investment (FDI) in various sectors, giving a boost to the stock market, and thereby, the economy. The Intellectual Property Rights (IPR) laws have become more stringent in India, enhancing investments in R&D. 'Over the years, these rising R&D investments will prove to be a major driver for the industry,' says the analyst of this research. 'Government policies such as 100 percent FDI, customs and excise duty cuts, establishment of export promotion zones, and special duty-free zones are also driving the industry.'
Another upshot of the current economic condition is the significant pressure placed on the developed economies to become more price competitive and lower costs in order to survive. This will encourage greater sourcing, outsourcing, and offshoring to India. The influx of FDI will perk up the economic prospects of the country and expand the purchasing power of the citizens. Indians are now moving away from their mindset of saving to spending more willingly on luxuries. 'The double-income culture further fuels this trend, making better quality products affordable,' notes the analyst. 'This development supports domestic demand in many sectors, including the chemical industry.'
Market Sectors
Expert Frost & Sullivan analysts thoroughly examine the following market sectors in this research:
- Commodity chemicals
- Specialty chemicals
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