The Economic Survey 2025–26 has once again underlined the growing importance of the Chemicals and Petrochemicals sector in India, highlighting its consistent contribution to economic growth, industrial performance, and employment generation. According to the survey, the sector continues to act as a backbone of Indian manufacturing, supported by strong domestic demand, expanding capacities, and deep integration with several downstream industries. This assessment places the sector at the centre of India’s long-term industrial and economic strategy and features prominently in Economic Survey 2025 26 News.

One of the key findings of the survey is that the chemicals and petrochemicals sector contributed 8.1% to the total manufacturing Gross Value Added (GVA) in FY24. This substantial share reflects the sector’s vital role in strengthening India’s manufacturing base and enhancing value addition across the economy. As manufacturing remains a critical driver of employment and productivity, the sector’s performance has direct implications for overall economic resilience and growth.

Importance of chemicals and petrochemicals in Indian manufacturing

The Chemicals and Petrochemicals sector India is one of the most diversified and interconnected segments of the manufacturing ecosystem. The Economic Survey notes that the industry has very strong backward linkages with petroleum refining and natural gas processing, ensuring a stable supply of critical inputs. At the same time, it has strong forward linkages with a wide range of downstream industries, making it indispensable to India’s industrial structure.

Industries such as the automotive sector, pharmaceuticals, agriculture, plastics, and consumer goods rely heavily on chemicals and petrochemicals as raw materials and intermediates. This interconnectedness amplifies the sector’s economic impact, as growth in chemicals directly supports output, efficiency, and innovation in multiple value chains. The survey highlights that this structural strength has enabled the sector to play a stabilising role even during periods of global uncertainty.

Resilience amid global supply chain disruptions

A key observation in the Economic Survey 2025-26 highlights is the sector’s ability to withstand global supply chain disruptions. In recent years, international trade has been affected by geopolitical tensions, logistics bottlenecks, and fluctuating energy prices. Despite these challenges, India’s chemicals and petrochemicals industry has shown remarkable resilience.

The survey attributes this resilience to the large domestic market and the sector’s increasing export potential. Strong domestic demand provides a stable base for production, while growing exports allow Indian manufacturers to diversify markets and reduce dependence on specific regions. This balance between domestic consumption and exports has helped the industry maintain steady growth even in uncertain global conditions.

Consistent rise in production over the last decade

One of the most compelling indicators of the sector’s strength is the steady increase in production volumes over the past decade. The Economic Survey reports that the production of major chemicals and petrochemicals increased from 45,638 thousand metric tonnes (MT) in FY16 to 58,617 thousand MT in FY25. This represents a compound annual growth rate (CAGR) of 2.8% during FY16–FY25.

This consistent rise in output reflects sustained investments in capacity expansion and process efficiency. Unlike short-term spikes driven by cyclical demand, this long-term growth trend suggests a structurally strong industry that is gradually scaling up to meet both domestic and international requirements. The data also reinforces confidence in the sector’s ability to support India’s broader manufacturing ambitions.

Drivers of growth: technology, investment, and policy support

The chemical sector CAGR India achieved over the past decade has been supported by multiple structural drivers. The survey highlights technology adoption as a key factor, with companies investing in modern processing units, automation, and environmentally efficient technologies. These investments have improved productivity, reduced costs, and enhanced product quality, making Indian producers more competitive globally.

Another major driver has been investment in capacity expansion. As demand from downstream industries such as pharmaceuticals and consumer goods has grown, chemical manufacturers have responded by scaling up production. This expansion has been complemented by supportive government policies aimed at strengthening domestic manufacturing and reducing import dependence.

The survey also points to policy support for scaling up, including initiatives focused on ease of doing business, infrastructure development, and incentives for investment. Together, these measures have created a favourable environment for long-term growth in the chemicals and petrochemicals sector.

Strong linkages with downstream industries

The downstream industries chemicals support extends across some of the most critical sectors of the Indian economy. In pharmaceuticals, chemicals form the basis for active pharmaceutical ingredients and intermediates, making the sector essential for healthcare security. In agriculture, fertilisers and agrochemicals play a crucial role in improving crop yields and food security.

Similarly, the automotive and consumer goods industries rely on petrochemicals for plastics, synthetic materials, and components. The Economic Survey emphasises that growth in chemicals has a multiplier effect, driving output and employment across these sectors. This interconnected growth model strengthens overall industrial performance and reduces vulnerabilities within individual industries.

Employment generation and skill development

Beyond output and value addition, the chemicals and petrochemicals sector is also a significant source of employment. The industry supports jobs across the value chain, from raw material processing and manufacturing to logistics, research, and marketing. As production volumes expand and capacities increase, employment opportunities are expected to grow further.

The survey suggests that continued focus on technology and modernisation will also increase demand for skilled labour. This creates opportunities for skill development and workforce upgradation, aligning with India’s broader objectives of enhancing human capital and improving productivity in manufacturing.

Export potential and global competitiveness

The Economic Survey notes that the export potential of chemicals India is steadily increasing. As Indian manufacturers improve quality standards and scale up operations, they are better positioned to compete in global markets. Export growth not only supports revenue diversification but also strengthens India’s balance of trade.

The sector’s expanding export footprint is also a sign of rising global competitiveness. By leveraging cost advantages, technological improvements, and policy support, Indian chemical companies are gradually moving up the value chain. This transition is essential for India’s ambition to emerge as a global leader in chemicals production.

Role in economic resilience and growth

The survey highlights the sector’s role in enhancing economic resilience. Its ability to maintain steady growth despite external shocks underscores its importance as a stabilising force within the economy. As India continues to pursue industrial diversification and self-reliance, the chemicals and petrochemicals sector is expected to play a central role.

By contributing significantly to Indian manufacturing GVA contribution, supporting exports, and enabling downstream industries, the sector strengthens the overall economic framework. Its performance also aligns with India’s long-term goals of sustainable growth, industrial competitiveness, and employment generation.

Future outlook and strategic importance

Looking ahead, the findings of the Economic Survey 2025-26 suggest a positive outlook for the chemicals and petrochemicals sector. Continued investments in capacity, innovation, and sustainability are likely to drive further growth. Policy initiatives aimed at attracting investment and promoting domestic manufacturing will add to this momentum.

As India positions itself as a global manufacturing hub, the chemicals and petrochemicals industry will remain a strategic pillar. Its strong linkages, consistent growth, and expanding global presence make it essential for achieving long-term industrial and economic objectives.

Conclusion

In conclusion, the Economic Survey 2025–26 highlights steady growth of the chemicals and petrochemicals sector, reaffirming its critical role in India’s economic and industrial landscape. With an 8.1% contribution to manufacturing GVA, rising production volumes, and resilience against global disruptions, the sector has demonstrated both strength and stability.

Supported by technology adoption, capacity expansion, and favourable policies, the industry is well-positioned to drive future growth. As India aims to become a global leader in chemicals production, the performance outlined in the survey underscores the sector’s importance in enhancing industrial performance, economic resilience, and sustainable growth in the years ahead.

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