India’s $220 billion chemical industry is struggling under an immense compliance burden. With over 635 compliance requirements each month, growth is severely hampered, especially for MSMEs. Industry sources and analysts express concern over these challenges.
MSMEs Struggle with Compliance
Rishi Agrawal, co-founder and CEO of TeamLease RegTech, highlights the difficulty for MSMEs to even understand compliance needs. He states, “Lack of training and skilled manpower makes it more challenging for units to comply.”
The frequent changes in compliance norms add to the burden. Agrawal notes, “As many as 200 compliance changes were made in the last week alone.” This situation is manageable for large players with dedicated in-house teams but poses a significant challenge for MSMEs.
State-Specific Compliance Variations
Jaimin Vasa, chairman of the Gujarat Chemical Association, points out the complexities arising from state-specific compliance needs. He says, “Compliance needs vary across states, complicating operations for companies in multiple locations.”
Vasa suggests a streamlined approach: “Ideally, there should be industry-specific generalised licensing instead of different ones for various regulations.”
Government Support and Digitalization
The government needs to simplify application processes and speed up clearances. Vasa urges, “The government should assist units in complying by making processes simpler and clearances faster.”
Agrawal identifies rent-seeking as a significant problem in obtaining registrations and licenses. He advocates for a controlled environment and private entrepreneurship to tackle this issue. “The rapid pace of digitalization can help,” he adds.
The Scale of the Chemical Industry
India’s chemical industry is a global leader, ranking sixth worldwide and third in Asia. It contributes about 11% to the country’s exports and is projected to reach $1 trillion by 2040. The sector’s global ranking improved from 142nd in 2014 to 63rd in 2019, as per the World Bank’s Ease of Doing Business Report 2021.
This industry supports various sectors, including agriculture, automotive, construction, and consumer goods, reflecting its diversity and resilience. India’s rich reserves of raw materials and a skilled workforce provide a strong foundation for the sector.
Government initiatives like the “Make in India” campaign have created a conducive environment for growth. Investment in infrastructure, research, and development, along with streamlined regulations, has further boosted the industry.
Despite its strengths, the sector faces significant compliance and regulatory challenges. Addressing these issues is crucial for sustaining growth. With continued support and strategic investments, the future of India’s chemical industry looks promising.
Frequent Regulatory Changes
The frequency of regulatory changes is a major concern. Agrawal notes that in the current quarter alone, around 1,963 compliance changes were made. This rapid pace of change is overwhelming for many companies.
The need for a more stable regulatory environment is critical. Consistent and predictable regulations would allow companies to plan better and reduce the risk of non-compliance.
The Call for Digital Solutions
Digital solutions could significantly reduce the compliance burden. Automating compliance processes would help companies keep up with frequent regulatory changes. Digital platforms can provide real-time updates and simplify the tracking of compliance requirements.
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Industry Recommendations
Industry leaders recommend several measures to alleviate compliance challenges:
- Simplify Licensing: Implement industry-specific generalised licensing to reduce the complexity of compliance.
- Improve Government Support: Streamline application processes and expedite clearances to assist companies in meeting compliance requirements.
- Promote Digitalization: Leverage digital solutions to automate compliance tracking and ensure real-time updates.
- Ensure Consistent Regulations: Establish a more stable regulatory environment with fewer frequent changes.
The Future of India’s Chemical Industry
Despite the challenges, the future of India’s chemical industry looks promising. The industry’s projected growth to $1 trillion by 2040 indicates its potential. Addressing compliance challenges will be crucial to achieving this growth.
Agrawal remains optimistic about the role of digitalization. He believes that digital solutions can transform compliance management, making it easier for companies to meet regulatory requirements.
Conclusion
The compliance burden on India’s chemical industry is significant, particularly for MSMEs. Frequent regulatory changes, state-specific compliance needs, and complex application processes add to the challenges. However, with government support and the adoption of digital solutions, these challenges can be mitigated. Simplifying licensing, improving government support, and ensuring consistent regulations will be key to the industry’s growth. Despite these hurdles, the future of India’s chemical industry remains bright, with its potential to reach $1 trillion by 2040.
Addressing the compliance challenges is essential for the industry to thrive. By implementing the recommended measures, India can ensure sustainable growth for its chemical industry, benefiting both large players and MSMEs.