The extensive compliance requirements are stifling growth in India’s $220 billion chemical industry, particularly affecting MSMEs. Each unit in this labor-intensive sector must meet up to 635 compliance requirements monthly, posing a significant challenge, according to industry sources and analysts.
Rishi Agrawal, co-founder and CEO of TeamLease RegTech, noted, “Understanding the compliance needs is difficult for most MSMEs. The lack of training and skilled manpower further complicates compliance efforts.”
Frequent changes in regulatory and compliance norms exacerbate the issue. “For example, in the last week alone, there were 200 compliance changes, 700 in the past month, and approximately 1,963 in the current quarter,” Agrawal said. While large companies have in-house teams to manage these requirements, MSMEs face considerable difficulty.
Jaimin Vasa, chairman of the Gujarat Chemical Association, suggested, “There should be industry-specific general licensing instead of multiple regulations under various acts like the Factories Act, health, explosives, hazardous materials, and food safety.”
Compliance needs also vary by state, complicating matters for companies operating in multiple locations. Vasa added, “The government should simplify the application process and expedite clearances to assist units in meeting compliance requirements.”
Agrawal pointed out that rent-seeking is a major issue in obtaining the necessary registrations and licenses for manufacturing units. He suggested, “To address this, we need a controlled environment and support for private entrepreneurship. The rapid pace of digitalization can be a significant aid.”
India’s chemical industry is the sixth largest globally and third largest in Asia, accounting for about 11% of the country’s exports and projected to reach $1 trillion by 2040. The industry has improved significantly in the World Bank’s Ease of Doing Business rankings, rising from 142nd in 2014 to 63rd in 2019.