India’s transportation and logistics sector is expected to experience significant growth, with a projected ~4.5% CAGR from 2022 to 2050, reaching 15.6 trillion tons/km by 2050. This growth is driven by data-driven decision-making and the rapid expansion of e-commerce and online retail, supported by government policies and technological advancements. According to the National Council of Applied Economic Research (NCAER), logistics costs are anticipated to account for around 8.9% of GDP in 2025-2026, serving as a crucial measure of the country’s supply chain and transportation infrastructure efficiency.
The National Logistics Policy aims to propel India into a $7 trillion economy by 2030, with a strong emphasis on reducing logistics costs, strengthening infrastructure, and streamlining trading operations. To achieve this, innovations such as the unified logistics interface platform (ULIP) and the logistics data bank have been implemented to facilitate seamless business operations and digitise container tracking, positioning India as a premier logistics hub.
In the chemical industry, Indian companies have demonstrated strong performance, outperforming global counterparts in total shareholder returns (TSR) with an annual growth rate of 20% between 2014 and 2023, surpassing the global average of 6%. However, there has been a decline in the average TSR growth for Indian chemical companies from 2020 to 2023, dropping to 9% due to decreasing margins. Despite this, the Indian chemical industry, spanning over 80,000 commercial products, including bulk chemicals, specialty chemicals, agrochemicals, petrochemicals, polymers, and fertilisers, remains highly diversified and contributes 7% to India’s GDP. Currently valued at US$ 220 billion, the industry is projected to reach US$ 300 billion by 2030 and US$ 1 trillion by 2040.
The COVID-19 pandemic has highlighted the vulnerabilities of the global supply chain due to over-concentration of manufacturing and assembling in China, leading to widespread disruptions and shortages. The Indian chemical sector, heavily reliant on imports from China and other parts of the world, was particularly affected by these disruptions.
India is working towards achieving self-reliance in the chemical sector. It aims to reduce import dependency by attracting investments in manufacturing quality products using cutting-edge technologies. The country’s chemical industry is also a significant player in generics, biosimilars, and vaccine manufacturing, contributing over 50% of the global vaccine supply.
With the chemicals sector expanding to meet rising domestic and international demand, India’s chemical industry offers substantial growth opportunities, especially as global companies seek to diversify their supply chains away from China. The Dahej PCPIR project in Bharuch has attracted a substantial investment of Rs. 1 lakh crore (~US$ 12 billion) and is expected to create 32,000 jobs, further underscoring the growth potential of India’s chemical industry in a globally uncertain environment.
What are the key supply chain challenges the chemicals industry faces
- Quality checks: Regular quality checks are essential to ensure the efficacy and safety of chemical products. Failing to conduct these checks can lead to equipment failures, malfunctions, and subpar production. Timely delivery of finished products is crucial for maintaining an organisation’s reputation. Delays can slow down processes and impact the global supply chain.
- Inventory optimisation: Inventory optimisation is crucial for managing time-sensitive chemical commodities. The supply chain teams today are supported by a wide range of application to have optimal inventory plan. The GPS-based system also help in scheduling the roots for delivery to service the customers in the appropriate time schedule.
- Geopolitical and Economic instability—Geopolitical factors that can lead to economic instability might impact the availability of ships, and freight might go up.
- Global supply chain disruption: Global disruptions can significantly impact the entire value chain process, particularly for multinational companies operating in multiple countries. (Ukraine-Russia War, Houthi Rebel Attacks)
- Developed industrial zones – In many countries, there are well-established industrial zones that have easy access to key feedstocks. However, in India, the chemical sector is dispersed, leading to higher logistic costs due to the majority of chemicals being imported.
In the chemical industry, the efficiency of supply chain management is heavily dependent on several key factors. Accurate demand planning and forecasting are crucial, as is effective inventory management and a comprehensive understanding of product lifecycles. One approach that has proven to be effective is Just-in-Time (JIT) inventory management, which can help reduce carrying costs. However, successful implementation of JIT requires strong supply chain coordination and reliable suppliers.
Modern technological advancements have also played a significant role in improving supply chain management in the chemical industry. Real-time monitoring systems, predictive analytics, and advanced algorithms have enabled manufacturers to predict potential bottlenecks, optimise production schedules, and even anticipate equipment failures before they occur. These tools have become invaluable in enhancing supply chain operations’ overall efficiency and reliability.
Furthermore, there is a shift towards push-driven supply chains, which involves managing inventory costs for made-to-stock processes, increasing customer loyalty for made-to-order processes, and optimising working capital with better logistics planning. These trends are particularly important for chemical companies, as they rely on their supply chains to support continuous production, increase margins, improve safety and compliance, and enhance customer loyalty through greater visibility and on-time deliveries.
