India’s Petrochemical Demand Expected to Stay Strong in Medium Term: Report

New Delhi — India’s petrochemical consumption is projected to grow at a healthy rate of 6–7 per cent per annum over the medium term, supported by sustained economic growth and rising demand for downstream products, according to a report released on Monday.

In this context, reducing dependence on imports has emerged as a key strategic priority. Both public and private sector companies have outlined aggressive expansion plans to significantly enhance domestic petrochemical capacity, the CareEdge Ratings report noted.

Polypropylene capacity, in particular, is expected to increase by 1.8 times between FY25 and FY30, exceeding the anticipated demand growth of 1.4 times. This expansion could largely eliminate India’s reliance on polypropylene imports by FY30, the report said.

However, CareEdge Ratings cautioned that improving cost competitiveness remains critical for domestic players. “A recovery in spreads and the ability to earn reasonable returns on investments will be the key monitorables for Indian petrochemical companies,” said Rabin Bihani, Associate Director at CareEdge Ratings.

In the near term, prices and spreads in the domestic petrochemical sector are likely to remain under pressure due to global oversupply. While there has been a marginal recovery in spreads during the first half of FY26, this may support an improvement of around 200 basis points in EBITDA margins for FY26.

“Nevertheless, a sustained recovery and achievement of optimal operating profitability will largely depend on cost competitiveness, the global demand-supply balance, and need-based policy support from the government,” said Hardik Shah, Director at CareEdge Ratings. He added that significant global capacity additions—particularly in China—have adversely impacted the profitability of Indian manufacturers for an extended period.

The report highlighted that consumption of key petrochemicals, including polymers such as polypropylene (PP), high-density polyethylene (HDPE), low-density polyethylene (LDPE), linear low-density polyethylene (LLDPE), polyvinyl chloride (PVC), as well as aromatics and elastomers, has recorded strong growth in India over the past few years. This momentum is expected to continue.

However, domestic capacity additions during this period have been relatively limited, resulting in a high dependence on imports to meet growing consumption. Globally, large-scale capacity expansions—led primarily by China—have outpaced demand growth, creating a demand-supply imbalance. This has led to weak product spreads and sustained pressure on operating profitability for Indian manufacturers over the three years ending FY25, as they faced competition from lower-cost Chinese imports.

Witth inputs from IANS