"GROWTH STRATEGIES FOR INDIAN CHEMICAL INDUSTRY
IN THE CONTEXT OF GLOBAL SLOWDOWN, WITH PARTICULAR REFERENCE TO CHINA"
Mr. Swaminathan Venkataraman, Director, Nandini Consultancy (S) Pte Ltd, Singapore
A well researched book on appropriate strategies to forge ahead for Indian chemical industry, discusses about the weakness and strength of Indian chemical industry, with particular reference to the competitive global market, where China has emerged as dominating player. Ways and means have been suggested for the Indian chemical industry to derive benefits from the present situation. The recent slowdown trend in the global economy are analyzed with facts, figures and case studies, which has been largely caused due to the problems faced by Chinese economy as a result of over capacity creation in China, leading to under utilization of capacity and consequent debt burden for industries and investors.
The study concludes that basic strength of Chinese chemical industry are intact, though the growth of Chinese chemical industry have somewhat slowed down in recent time. The author points out that the growth in China has not halted, but is now stabilizing at more realistic level resulting in consolidation of Chinese chemical industry.
Indian chemical industry has to keep an eye on China all the time, in view of its dominating presence in the global market, which is likely to continue for long time to come.
Approach of multinational companies
Spectacular growth of chemical industries in China in recent years has not only benefitted the Chinese economy and chemical industry but also the fortunes of several multinational chemical companies, which have invested huge sum in China and reaped the benefits. Multinational companies are not unduly perturbed by the recent slowdown in China and they continue to bet on China, as evident from the continued expansion by several multinational companies in China including by BASF, Dow and others. Several instances have been highlighted.
In any case, as China is unlikely to record spectacular level of growth in the coming period, similar to what it achieved in the last decade, multinational companies have to look for alternate regions, in addition to China, for investment and for market penetration to sustain their own growth.
Obviously, India stands as prospective destination for the multinational companies, as India remains largely insulated from the global slowdown and represents an under penetrated potential market with considerable landscape, resources and tropical advantages. This is clearly evident from the huge welcome received by Indian Prime Minister during his recent visits abroad and the visits of several world leaders to India, the recent one being that of the Germany chancellor.
The author stresses the fact that most of the problems faced by the Indian chemical industry are due to lack of capacity creation efforts during the last 10 years , in tune with the growth in demand.
The book discusses various issues facing the Indian chemical industry that have come in the way of building up of capacity. While discussing the issues, Indian scenario have been compared to China, as there is need for Indian chemical industry to bench mark with China.
Indian import trend
Increasing Indian import trend with regard to chemicals presently produced, chemicals not produced and the chemicals now not produced but produced earlier have been indicated clearly with data and chart, highlighting the fact that India has become net importer of several chemicals.
Author argues that there is urgent need to kickstart the manufacturing activities in the small, medium and large scale sector. However, there are certain impediments in doing so.
Inadequate technology development efforts
Of the many issues, inadequate focus on research and development to develop appropriate technology in tune with the Indian need is pointed out as major deterrent factor. As a result, several units in small and medium scale could not be set up, in spite of adequate demand in the country due to want of indigenous technology. Such small and medium scale units cannot afford to buy technology from overseas sources due to prohibitive cost factors.
In the case of large scale sector, it appears that the capacity creation in India has largely been conditioned by the willingness of overseas suppliers to provide technology on turnkey basis. Indian chemical industry is often seen paying huge fees for such technology acquisition from abroad. Technology for the products already produced in India are being repeatedly sought from abroad. Several case studies have been highlighted in the book to explain the scenario.
Both CSIR labs and the companies in public and private sector are blamed for such impasse in R&D programme. Several measures have been suggested to augment R&D efforts including need for research index to quantify contribution of R&D to overall growth of the chemical industry and national economy.
Need to avoid impending energy crisis
The book discusses the impending energy crisis in India due to huge import of crude oil, natural gas and coal, with no sign of indigenous production of these feedstock / fuel source being increased to the level of requirement in the near future. Several energy options have been discussed in detail.
Need for strong trading houses
Apart from several other issues discussed, the importance of floating strong trading / distribution companies to penetrate the export market have been stressed and a number of case studies have been provided with suggestions.
Need for more proactive government policies, strategy to overcome land acquisition issues, importance and strategy for promoting joint ventures abroad, promotion of industrial parks, revival programme for sick projects and rationale of unrelated diversification etc. have also been discussed with several case studies and supporting data.
Finally, the author laments about the several missed chemical project opportunities due to want of focused efforts and suggests strategy for identification of appropriate project opportunities for investment.
The profile of selected missed chemical project opportunities are discussed, by way of example.
The book has the depth and clarity and meets the expectations of discerning chemical industry professionals.
Book is published in CD as pdf in ppt format, consisting of around 250 slides